Foreign direct investment (FDI) inflows into the Philippines weakened at the start of 2026, extending a broader downtrend as global and domestic uncertainties continue to dampen investor sentiment, according to the Bangko Sentral ng Pilipinas (BSP).

Preliminary data from the central bank showed that net FDI inflows declined to $443 million in January 2026, down from $729 million in the same month last year.

The BSP said the decline indicates that “rising geopolitical risks are weighing on investor sentiment,” as tensions abroad and tighter global financial conditions affect capital flows.

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.

In January 2026, Philippine FDIs were dampened mainly by rising geopolitical uncertainty rather than actual shocks. Investors were already wary of anticipated instability in the Middle East, which poses risks to global oil supply and future inflation in an oil-import-dependent economy.

At the same time, a global risk-off sentiment led to foreign capital outflows, signaling weaker confidence in emerging markets. Ongoing tensions in the South China Sea and the broader US–China rivalry further added uncertainty, prompting investors to delay or reconsider long-term investment commitments in the Philippines.

The BSP said Japan remained the top source of investments, with inflows largely directed to manufacturing. Equity placements also came from the United States and South Korea and were channeled to real estate and wholesale and retail trade.

By component, net equity capital inflows reached $70 million, as placements of $93 million were partly offset by $22 million in withdrawals. Reinvestment of earnings dropped sharply to $53 million, while net debt instruments—mainly intercompany borrowings—amounted to $320 million, accounting for the bulk of inflows.

The January decline follows a weak 2025 performance, when FDI inflows fell to $7.8 billion for the full year—a 17.1 percent drop and the lowest level since the height of the pandemic—underscoring sustained investor caution.

The BSP attributed the 2025 slump to a mix of external and domestic factors, including US President Donald Trump’s blanket tariffs and local governance concerns linked to the flood control scandal, which deterred foreign investors.

The continued softness in FDI highlights the challenge of sustaining investor confidence amid rising global risks, including geopolitical tensions and market volatility. Economists noted that while long-term fundamentals remain intact, foreign investors have become more selective, particularly in emerging markets.