Foreign direct investments (FDI) entering the Philippines reached nearly $1.3 billion in July – the highest monthly inflow in a year – despite a 7.5-percent year-on-year decline due to lower lending by foreign parent firms to their local subsidiaries.
Data from the Bangko Sentral ng Pilipinas (BSP) showed that net FDI inflows stood at $1.27 billion in July, down from $1.37 billion in the same month last year, but marking the strongest monthly performance since July 2024.
‘The decrease in FDI net inflows during the month resulted from lower nonresidents’ net investments in debt instruments,’ the BSP said.
Investments in debt instruments, consisting mainly of intercompany borrowing between foreign direct investors and their subsidiaries or affiliates in the Philippines, fell by 39.4 percent to $711 million in July from $1.17 billion in the same month last year.
Still, the decline in intercompany borrowings was partly offset by higher equity capital placements at $418 million, more than five times the $76 million recorded a year earlier. Reinvestment of earnings also rose by 14.3 percent to $139 million.
Equity infusions hit $460 million in July, more than triple the $135 million in the same month last year. On the other hand, equity withdrawals declined by 28.4 percent to $42 million from $59 million.
According to the BSP, equity capital infusions in July came mainly from Japan and the United States, with the wholesale and retail trade sector receiving the bulk of these investments, followed by manufacturing and real estate.
On a cumulative basis, FDI inflows from January to July totaled $4.7 billion, 20 percent lower than the $5.9 billion posted in the same period in 2024.
The BSP attributed this to ‘muted global investor sentiment’ amid tight financial conditions and geopolitical uncertainties.
For the seven-month period, Japan accounted for 60 percent of gross equity capital placements, followed by the US (15 percent), Singapore (eight percent) and South Korea (five percent).
The top recipient industries were manufacturing (36 percent), wholesale and retail trade (30 percent) as well as real estate (15 percent).
Security Bank chief economist Angelo Taningco said the year-on-year decline in FDI was due to a high base, as July last year posted large inflows.
‘I expect FDI inflows to be tempered by increased external uncertainty from higher US tariffs as well as domestic governance issues surrounding government flood control projects,’ Taningco said.
‘Moderation in both investor sentiment and business confidence will likely ease FDI inflows over the near term,’ Taningco added.
The central bank expects FDI inflows to hit $7.5 billion this year and $8 billion in 2026.