Private capital funding in the Philippines grew 34 percent year-on-year in 2025, bucking the broader Southeast Asian trend where venture investments declined, according to a recent study by Foxmont Capital Partners.

Private capital is defined as money invested directly into privately owned companies or assets that are not traded on public stock markets. In its 2026 Philippine Private Capital Report, the firm said the increase was driven largely by larger deal sizes and a broader mix of financing structures, signaling sustained investor interest despite tighter global liquidity and cautious market conditions.

However, the report said the more critical challenge lies ahead, as the country transitions from a consumption-driven growth model toward one anchored on productivity and capital deepening.

“The Philippines has long benefited from favorable demographics and resilient demand, but the next phase of growth will depend on productivity, capital formation, and stronger firms,” said Foxmont Managing Partner Jelmer Ikink.

At present, the Philippines’ gross fixed capital formation stands at around 21 percent of GDP, significantly below the 30 to 40 percent seen in faster-growing regional peers.

To close this gap, the report estimates the country would need an additional $40 billion to $90 billion in annual fixed-asset investments, with private capital expected to play a central role alongside public spending and development finance.

Despite the funding growth, the report stressed that how capital is deployed will be more important than the volume of investments.

Industry leaders highlighted that companies are increasingly investing in technology upgrades, particularly to serve the expanding middle class, although investments in automation remain limited but are expected to accelerate.

The report identified key sectors where productivity gains could be significant.

In manufacturing, the Philippines remains a major player in the global semiconductor industry, generating about $39 billion in exports and accounting for 60 percent of the country’s merchandise exports.

However, much of the value is concentrated in assembly, testing and packaging, with higher-value activities such as integrated circuit design offering substantially greater returns and productivity gains.

In the services sector, a widening gap is emerging between traditional industries and technology-enabled businesses. E-commerce platforms, for instance, generate more than $135,000 in output per worker annually—around 50 times higher than traditional retail, highlighting the productivity potential of digitalization.

The report also noted that while the Philippines produces around 120,000 to 140,000 IT and computer science graduates annually, there is a need to better align skills development with industry requirements, particularly as digital sectors expand.

Foxmont said the Philippines remains a high-potential investment destination, supported by strong demographics and domestic demand, even as regional peers such as Indonesia and Vietnam saw venture funding decline by as much as 30 percent or more.

Still, sustaining long-term growth will depend on whether capital flows can be directed toward sectors that increase productivity, strengthen firms and move the economy up the value chain.

“The question is no longer just how much capital is raised, but how effectively it is deployed,” the report said, noting that capital deepening and productivity growth will ultimately determine the country’s next phase of economic expansion.