FDI net inflows sink nearly 28% in March — BSP

United States President Donald Trump’s unpredictable trade policies drove down the country’s net inflows of foreign direct investments (FDI) in March by 27.8 percent to $498 million from $689 million recorded in the same month of 2024.

The Bangko Sentral ng Pilipinas (BSP) on Tuesday reported both debt and equity investments plunged, which economists said reflected the “wait-and-see” approach of investors amid Trump’s high tariffs.

BSP said net debt investments slid by 31.6 percent to $329 million from $481 million year-on-year.

Net equity investments excluding reinvestment of earnings fell slower by 27.4 percent to $102 million. Last year, the central bank recorded $141 million.

A narrower gap was seen in reinvestment of earnings which declined by 1.2 percent to $66 million from $67 million.

Bulk of equity investments from Singapore

The bulk of equity investments came from Singapore which contributed 25 percent. This was followed by Japan which had a share of 24 percent and the United States which had 20 percent.

The top industry-recipients of these investments were real estate which accounted for 37 percent, manufacturing with 33 percent, and financial and insurance with 9 percent.

Cumulatively, FDI net inflows in the first quarter of the year decreased by 41.1 percent to $1.8 billion from $3 billion last year.

Rizal Commercial Banking Corporation chief economist Michael Ricafort said foreign individuals and businesses delayed investments in anticipation of faster inflation and lower incomes under US President Donald Trump’s protectionist trade policies.

Cautiousness in external trade

“There was cautiousness especially for external trade, with some exporters adopting a wait-and-see stance in terms of their production and inventory management,” Ricafort said.

“Within the equity space, investors appear to be recalibrating exposure toward markets with credible domestic policy anchors and limited sensitivity to global supply chain disruption,” the Institute of International Finance added.

Ricafort said the new overall FDI net inflows fell short of the $765 monthly average, but surpassed the $102 million recorded in December last year.

“On a monthly basis, it is still considered decent and among pre-pandemic highs,” Ricafort said.

Moving forward, the economist said FDI could remain relatively soft as investors fear economic instability in the Philippines as it continues to assert sovereignty in the West Philippines against China.

Geopolitical uncertainties

“Going forward, other geopolitical uncertainties in the region such as the China-Taiwan conflict and their respective allies could be risk factors to FDI,” Ricafort said.

He said investors’ confidence might strengthen if the government advances proposals on banning exports of mineral ore.

“It would be an important first step for the establishment of local mineral ore processing which would require a lot of capital into the country,” Ricafort said.

He added the projected lower policy rates from the BSP and US central bank to lenders this year could increase purchases of goods and services, translating into higher equity investments in local firms.

BSP Governor Eli Remolona said last month the Monetary Board is studying to ease its policy by two more cuts toward 5 percent by year-end.