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Buildings are enveloped in thick smog in Quezon City in this file photo. \u2014 PHILIPPINE STAR\/MIGUEL DE GUZMAN<\/p>\n Buildings are enveloped in thick smog in Quezon City in this file photo. \u2014 PHILIPPINE STAR\/MIGUEL DE GUZMAN<\/p>\n
By Katherine K. Chan, Reporter<\/p>\n
THE PHILIPPINES might continue to struggle to attract foreign direct investment (FDI) for the remainder of 2026 as lingering geopolitical risks and domestic governance concerns keep investors cautious, analysts said.\u00a0<\/p>\n
\u201cWe may have to grapple with subdued FDI growth for the rest of the year,\u201d Marco Antonio C. Agonia, an economist at the University of Asia and the Pacific (UA&P), told BusinessWorld in an e-mail. \u201cThe domestic economy is still vulnerable to external shocks and has thus far not yet resolved its governance issues.\u201d <\/p>\n
Mr. Agonia noted higher borrowing costs have also stifled investment growth, which could keep the Philippines behind its neighbors with more conducive business environments and investment climates.\u00a0<\/p>\n
In April, the Philippines saw the lowest level of FDI inflows in nearly 10 years, with central bank data showing a 58.8% year-on-year plunge to $250 million from $607 million.<\/p>\n
This marked the lowest monthly FDI inflows since $244 million in June 2016, and the largest annual decline since 76.1% in December 2022.<\/p>\n
The slump in FDI inflows came amid heightened uncertainty over the Middle East war, although SM Investments Corp. Group Economist Robert Dan J. Roces noted this may be mainly due to lower intercompany borrowings.\u00a0 \u00a0<\/p>\n
\u201cStill, if the slowdown persists, it could weigh on capital formation, job creation and productivity, especially in manufacturing, infrastructure, energy, property and exporting industries,\u201d Mr. Roces told BusinessWorld via Viber.<\/p>\n
He expects FDI inflows to remain muted and uneven throughout the year as investors continue to be wary of external and domestic headwinds.<\/p>\n
In the first four months of the year, the Philippines posted $1.968 billion in FDI net inflows, 26.5% lower than $2.675 billion in the same period last year.<\/p>\n
UA&P\u2019s Mr. Agonia said this slowdown could dent economic growth momentum as fewer investments weaken aggregate demand and could eventually undermine the country\u2019s productive capacity.\u00a0<\/p>\n
\u201cThe newfound slump in FDI net inflows will likely hurt the country\u2019s growth momentum,\u201d he said.<\/p>\n
\u201cIn the immediate term, slower investments mean softer aggregate demand. In the medium to long term, however, slower FDI formation translates into subdued improvements in the economy\u2019s productive capacity, damaging the country\u2019s prospects for transformative growth,\u201d he added.\u00a0<\/p>\n
The Philippines\u2019 economic momentum has been weak since late last year, as a widescale flood control corruption scandal took a hit on investor sentiment, dampening investment flows to the country. Gross domestic product (GDP) growth slowed to 4.4% in 2025 from 5.7% in 2024.<\/p>\n
Economic volatility stemming from the Middle East war dashed the Philippines\u2019 recovery hopes, as GDP growth slowed to a new post-pandemic low of 2.8% in the first quarter.\u00a0<\/p>\n
This prompted economic managers to slash the GDP growth target to 3.5-4.5% for this year from 5-6% previously.<\/p>\n
Mr. Agonia said lower FDI inflows could likewise take a toll on knowledge and financial capital-intensive sectors, including transportation, infrastructure, manufacturing, renewable energy, and higher value-added agro-industry production.<\/p>\n
\u201cIn particular, net debt instrument investment has been declining in previous months, which would likely undermine developments in infrastructure and manufacturing,\u201d he added.<\/p>\n
Meanwhile, Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said sustained inflows of equity investments suggest that investors remain upbeat about the Philippines.<\/p>\n
\u201cWhile this could weigh on investment, jobs, and long-term growth if sustained, it is encouraging that equity investments remain positive, indicating that investors still see value in the Philippines,\u201d he told BusinessWorld in a Viber message.<\/p>\n
Analysts said the government should implement reforms to resolve its governance issues and enhance ease of doing business to regain lost investor confidence.<\/p>\n
\u201cThe key now is to strengthen policy consistency, improve ease of doing business, accelerate infrastructure development, and reinforce good governance to convert investor interest into actual investments,\u201d Mr. Ravelas noted.\u00a0<\/p>\n
The Philippines would also need a less uncertain investment climate to attract more foreign investments in key industries, according to Mr. Roces.<\/p>\n
\u201cTo turn this around, the country needs less uncertainty and faster execution such as consistent rules, credible governance, lower power costs, and quicker turnaround for public projects already in the pipeline,\u201d he said. \u201cInvestors can price risk, but they struggle to price unpredictability.\u201d <\/p>\n
Meanwhile, Mr. Agonia said the country\u2019s elevation to an upper-middle income country (UMIC) and good standing in the Institute of International Finance\u2019s (IIF) investor relations ranking may also help attract more investments. \u00a0 \u00a0<\/p>\n
\u201cFor now, the country\u2019s transition to UMIC status and its favorable ranking on the IIF\u2019s list are tangible tailwinds for the local economy\u2019s foreign investment picture,\u201d he said. \u201cFor this to take off in the medium to long term, however, the country will have to conduct structural reforms to address governance issues and the domestic economy\u2019s inherent vulnerability to external shocks.\u201d<\/p>\n
Earlier this month, the World Bank reclassified the Philippines to upper-middle income from lower-middle income, after the country reached a gross national income per capita of $4,850, within the World Bank\u2019s GNI per capita range for UMICs of $4,636 to $14,375. <\/p>\n
The Philippines also scored 49.3 out of 50 in investor relations in the IIF\u2019s 2026 Investor Relations and Debt Transparency Report, outperforming 56 other countries to earn the top spot in the category. <\/p>\n
The central bank earlier said that the cautious global investment climate and local governance issues could bring FDI net inflows to $7 billion this year, lower than the estimated $7.8 billion in 2025.<\/p>\n
However, it sees a gradual but uneven recovery by next year, with FDI net inflows projected to reach $8 billion by end-2027.<\/p>\n
FDIs refer to cross-border investments in which a nonresident investor holds at least 10% equity in a resident enterprise. These may take the form of equity capital, reinvestment of earnings and intercompany borrowings.<\/p>\n
The BSP\u2019s FDI data reflect actual investment flows. This differs from the Philippine Statistics Authority\u2019s approved foreign investment data, which represent investment commitments that may not necessarily be realized within the reference period.<\/p>\n","protected":false},"excerpt":{"rendered":"Buildings are enveloped in thick smog in Quezon City in this file photo. \u2014 PHILIPPINE STAR\/MIGUEL DE GUZMAN…\n","protected":false},"author":2,"featured_media":550961,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[114,184,85,46,246045],"class_list":["post-550960","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-il","tag-israel","tag-katherine-k-chan"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/550960","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=550960"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/550960\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/550961"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=550960"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=550960"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=550960"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}