Largely due to a mix of onshore concerns stemming from the flood-control graft scandal, net inflows of brick-and-mortar foreign direct investments (FDI) in the Philippines dropped to $320 million in September—the lowest level since the $313.8 million recorded in April 2020, when the most stringent Covid-19 lockdowns were first imposed.

The latest preliminary data from the Bangko Sentral ng Pilipinas (BSP) on Wednesday, Dec. 10, showed that September FDI inflows fell by over a quarter from $432 million in the same month last year.

Japan emerged as the primary source of FDIs during the month, with the manufacturing sector receiving the largest inflows.

Japan was likewise the top source of equity capital placements since January, followed by the United States (US) and Singapore.

“Industries that received most of these investments were manufacturing, wholesale and retail trade, and real estate,” the BSP said.

As of end-September, net FDI inflows dropped 22.2 percent to $5.54 billion from $7.12 billion in the same period in 2024. It can be noted that year-to-date inflows were lower year-on-year since January.

Measured against the Philippines’ FDI target of $10 billion this year, the nine-month total now stands at 55.4 percent. This year’s target is higher than last year’s $9.44 billion in attracted investments.

FDI refers to cross-border investments where a nonresident investor owns at least 10 percent of the equity in a local enterprise and may take the form of equity capital, reinvested earnings, or intercompany borrowings.

FDI net inflows as of end-September, the BSP said, were equivalent to 1.6 percent of the country’s gross domestic product (GDP) during the period.

Private-sector economists believe the decline in FDIs could be attributed to both global and local developments.

Philippine Institute for Development Studies (PIDS) senior research fellow John Paolo Rivera argued that while global uncertainty is a contributing factor, a more serious drag stems from onshore developments “due to the corruption scandal that stalled government spending, weaker-than-expected GDP growth, and the resulting dip in investor confidence.”

“These created hesitation among foreign firms, especially those assessing long-term projects in manufacturing, infrastructure, and services,” Rivera said, adding that the wild swings of the peso, compounded by delays in project approvals, contributed another layer of cautiousness to sentiment.

SM Investments Corp. (SMIC) group economist Robert Dan Roces said the over-five-year-low FDIs could be attributed to investors’ cautiousness amid slower economic growth domestically and still-elevated global interest rates.

Growth slowed sharply to four percent in the third quarter of the year due to dampened business sentiment and tightened government spending. GDP expansion averaged five percent in the first three quarters of 2025, below the government’s 5.5- to 6.5-percent goal.

Jonathan Ravelas, senior adviser at Reyes Tacandong & Co., said the decline reflects “global uncertainty, high borrowing costs, and lingering policy gaps,” noting that a strong rebound in the last quarter is needed to hit the central bank’s target.

Looking ahead, Ravelas expects “modest inflows in manufacturing and real estate if confidence improves.” He also asserted that “now” is the appropriate time for businesses to “push clarity and competitiveness to attract capital.”

Roces believes inflows to the country remain “positive, but momentum will likely stay moderate until borrowing costs ease and reforms gain traction.”

Rivera said the drop implies that “investors are waiting for clearer governance signals, more stable policy execution, and stronger economic momentum before committing fresh capital.”