Foreign direct investments (FDIs) plummeted to a five-year low in 2025 as governance concerns weighed on foreign investor sentiment, according to the latest data from the Bangko Sentral ng Pilipinas (BSP).

In a statement issued Tuesday evening, the central bank said FDI net inflows reached $7.8 billion from January to December 2025 — a 17.1 percent decrease from the previous year and the lowest level since the height of the Covid-19 pandemic. In December alone, FDIs posted net inflows of $560 million, representing a 37.6 percent decline month-on-month and snapping a two-month streak of rising inflows.

Despite the year-on-year decline, the January–December 2025 figure remained within the BSP’s earlier projection of FDIs reaching $7 billion by the end of the year.

For 2025, equity capital placements were sourced primarily from Japan, the United States, Singapore and South Korea, and were channeled largely into the manufacturing, wholesale and retail trade, and financial and insurance industries.

FDIs refer to investments made by foreign companies or individuals in businesses, factories or projects located in another country with the intention of long-term control or significant influence, rather than short-term financial returns.

RCBC Chief Economist Michael Ricafort attributed the annual decline to “external risk factors, particularly Trump's higher tariffs, trade wars and protectionist policies that slowed down the US and global economy,” while also noting domestic developments related to the ongoing flood control infrastructure scandal “that weighed on market and investor sentiment.”

“The decline in FDIs in recent months [was] largely due to the political noise, especially since September 2025, that led to a wait-and-see attitude among some foreign investors,” he added.

The infrastructure scandal has seen numerous developments since the start of 2026, with former senator Bong Revilla currently incarcerated at the Payatas jail, while the President appeared to confirm yesterday the whereabouts of fugitive former congressman Zaldy Co in Portugal.

With various sources reporting losses reaching into the trillions of pesos due to corruption linked to anomalous infrastructure projects, business sentiment has remained subdued. In its inaugural round of monthly confidence surveys, the central bank said the Confidence Index (CI) remained positive at 0.9 percent, indicating that more businesses remain optimistic about the economy than pessimistic. However, the figure marks a sharp drop from the 29.7 percent recorded in the fourth quarter of last year.

As a result, the BSP has cut its key policy rate twice over the past three months to stimulate demand by encouraging banks to inject more liquidity into the economy. The latest cut, announced on 19 February, was aimed at restoring confidence in the Philippine economy — a critical step for recovery, according to central bank chief Eli M. Remolona Jr.

“The pace of economic recovery will depend on how quickly confidence returns. As always, policy decisions will be driven by the data we have at the time we make those decisions,” he said.

Ricafort likewise said that successful probes into the “floodgate” scandal could help restore market sentiment.

“For the coming months, improved governance standards and reforms would help strengthen international investor confidence and sentiment, including for FDIs,” he said.

“FDIs could improve in 2026 if anti-corruption measures and other reforms aimed at strengthening governance standards are taken seriously, as these are also key to the catch-up government spending needed to offset the soft patch and underspending in the latter part of 2025 due to the political noise largely attributed to the anomalous flood control projects,” Ricafort added.