FDI inflows slump 35% despite February rebound

Foreign direct investment (FDI) inflows into the Philippines fell sharply in the first two months of 2026, underscoring growing investor caution amid geopolitical tensions, global volatility and slowing capital flows.

Data released by the Bangko Sentral ng Pilipinas (BSP) showed net FDI inflows reached $1.03 billion in January to February, down 34.8 percent from $1.58 billion recorded in the same period last year.

While February alone posted net inflows of $590 million, higher than January’s $443 million, the monthly figure was still 31 percent lower year-on-year.

The decline was driven largely by weaker debt instrument inflows, which fell 38.8 percent to $734 million during the two-month period. Net equity capital placements also dropped 12.5 percent to $171 million, reflecting softer investor appetite for Philippine assets.

The BSP said the United States was the top source of investments in February, while funds were mostly directed to financial and insurance activities. For the January-February period, Japan, the United States and Singapore were the main investment sources, with inflows channeled largely into manufacturing, financial services and real estate.

Despite the February rebound, the broader trend points to weakening foreign investor sentiment as the Philippines grapples with external headwinds and rising uncertainty.

The soft FDI data came alongside BSP reports showing a widening balance of payments deficit and declining gross international reserves, signaling mounting pressure on the country’s external position.

Earlier BSP data showed the balance of payments deficit widened to $2.6 billion in March, while gross international reserves fell to a 15-month low in April amid debt servicing payments and foreign exchange operations.

The central bank has also flagged elevated geopolitical risks and volatile global financial conditions as major factors affecting capital flows and investor confidence.

Analysts said the sustained drop in FDI inflows could weigh on long-term growth prospects, particularly as foreign investments are critical in supporting manufacturing expansion, job creation and technology transfers.

The slowdown also contrasts with the government’s aggressive investment promotion efforts, including tax incentives and economic liberalization reforms designed to attract more foreign capital.

Still, the BSP maintained that the country continues to benefit from structural growth drivers, including a large consumer market, stable banking system and ongoing infrastructure development, which could support investment inflows once external conditions stabilize.