Philippines FDI inflows fall to USD 3.4 billion

MANILA — Foreign direct investment net inflows into the Philippines fell to USD 3.382 billion in the first six months of 2026, down 17.8% from USD 4.116 billion in the same period last year, as foreign companies reduced intercompany borrowing and reinvested earnings, according to the Bangko Sentral ng Pilipinas.

The decline matters because FDI provides longer-term capital that can help finance factories, services, property development, corporate expansion, and other activities that support employment and productive capacity.

The first-half figures, however, also show a shift in the type of foreign capital entering the country: equity investment increased even as debt-related flows and retained earnings declined.

Net investments in debt instruments, the largest component of FDI during the period, dropped 25.8% to USD 2.063 billion from USD 2.781 billion a year earlier.

The BSP said the lower debt-instrument inflows indicated reduced intercompany borrowing between foreign direct investors and their Philippine subsidiaries or affiliates.

Reinvestment of earnings declined 19.4% to USD 829 million from USD 1.028 billion in the first half of 2025.

Net equity capital other than reinvestment of earnings moved in the opposite direction, climbing 59.3% to USD 489 million from USD 307 million.

Equity capital placements during the first half came primarily from Japan, the United States, and Singapore, according to the central bank.

Those funds were directed largely to manufacturing, financial and insurance activities, and real estate.

The latest FDI figures come amid broader weakness in Philippine investment activity. Gross domestic product grew 2.3% year on year in the second quarter of 2026, while gross capital formation contracted 9.2%. The industry sector shrank 2.4%, although manufacturing expanded 2.6%, according to the Philippine Statistics Authority.

The decline in actual FDI also contrasts with a rise in foreign investment commitments approved by investment promotion agencies. The PSA reported that approved foreign investments increased 68.2% to PHP 115.20 billion in the second quarter from PHP 68.48 billion a year earlier.

The two measures are not directly comparable. BSP figures record actual investment inflows, while the PSA’s approved foreign investment statistics measure commitments reported by investment promotion agencies that may not be fully realized during the period.

The BSP compiles FDI statistics under the International Monetary Fund’s Balance of Payments and International Investment Position Manual, Sixth Edition, or BPM6.

Under that framework, FDI includes investment by a nonresident direct investor in a resident enterprise when the investor owns at least 10% of the enterprise’s equity capital. It also covers investments made by a nonresident subsidiary or associate in its resident direct investor.

FDI may take the form of equity capital, reinvestment of earnings, or borrowings, with net FDI calculated from net equity capital, reinvested earnings, and net debt instruments.

The BSP presents equity capital on a net basis, subtracting withdrawals from placements. The PSA’s approved foreign investment data do not account for equity withdrawals and do not apply the BPM6 10% foreign-ownership threshold.