By Katherine K. Chan, Reporter
THE PHILIPPINES might continue to struggle to draw foreign direct investment (FDI) for the remainder of 2026 as lingering geopolitical risks and domestic governance concerns keep investors cautious, analysts said.
“We can have to grapple with subdued FDI growth for the remainder of the 12 months,” Marco Antonio C. Agonia, an economist on the University of Asia and the Pacific (UA&P), told BusinessWorld in an e-mail. “The domestic economy remains to be vulnerable to external shocks and has to date not yet resolved its governance issues.”
Mr. Agonia noted higher borrowing costs have also stifled investment growth, which could keep the Philippines behind its neighbors with more conducive business environments and investment climates.
In April, the Philippines saw the bottom level of FDI inflows in nearly 10 years, with central bank data showing a 58.8% year-on-year plunge to $250 million from $607 million.
This marked the bottom monthly FDI inflows since $244 million in June 2016, and the biggest annual decline since 76.1% in December 2022.
The slump in FDI inflows got here amid heightened uncertainty over the Middle East war, although SM Investments Corp. Group Economist Robert Dan J. Roces noted this may increasingly be mainly on account of lower intercompany borrowings.
“Still, if the slowdown persists, it could weigh on capital formation, job creation and productivity, especially in manufacturing, infrastructure, energy, property and exporting industries,” Mr. Roces told BusinessWorld via Viber.
He expects FDI inflows to stay muted and uneven all year long as investors proceed to be wary of external and domestic headwinds.
In the primary 4 months of the 12 months, the Philippines posted $1.968 billion in FDI net inflows, 26.5% lower than $2.675 billion in the identical period last 12 months.
UA&P’s Mr. Agonia said this slowdown could dent economic growth momentum as fewer investments weaken aggregate demand and will eventually undermine the country’s productive capability.
“The newfound slump in FDI net inflows will likely hurt the country’s growth momentum,” he said.
“Within the immediate term, slower investments mean softer aggregate demand. Within the medium to long run, nonetheless, slower FDI formation translates into subdued improvements within the economy’s productive capability, damaging the country’s prospects for transformative growth,” he added.
The Philippines’ economic momentum has been weak since late last 12 months, as a widescale flood control corruption scandal took successful on investor sentiment, dampening investment flows to the country. Gross domestic product (GDP) growth slowed to 4.4% in 2025 from 5.7% in 2024.
Economic volatility stemming from the Middle East war dashed the Philippines’ recovery hopes, as GDP growth slowed to a brand new post-pandemic low of two.8% in the primary quarter.
This prompted economic managers to slash the GDP growth goal to three.5-4.5% for this 12 months from 5-6% previously.
Mr. Agonia said lower FDI inflows could likewise take a toll on knowledge and financial capital-intensive sectors, including transportation, infrastructure, manufacturing, renewable energy, and better value-added agro-industry production.
“Specifically, net debt instrument investment has been declining in previous months, which might likely undermine developments in infrastructure and manufacturing,” he added.
Meanwhile, Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said sustained inflows of equity investments suggest that investors remain upbeat in regards to the Philippines.
“While this might weigh on investment, jobs, and long-term growth if sustained, it’s encouraging that equity investments remain positive, indicating that investors still see value within the Philippines,” he told BusinessWorld in a Viber message.
Analysts said the federal government should implement reforms to resolve its governance issues and enhance ease of doing business to regain lost investor confidence.
“The important thing now could be to strengthen policy consistency, improve ease of doing business, speed up infrastructure development, and reinforce good governance to convert investor interest into actual investments,” Mr. Ravelas noted.
The Philippines would also need a less uncertain investment climate to draw more foreign investments in key industries, in line with Mr. Roces.
“To show this around, the country needs less uncertainty and faster execution comparable to consistent rules, credible governance, lower power costs, and quicker turnaround for public projects already within the pipeline,” he said. “Investors can price risk, but they struggle to cost unpredictability.”
Meanwhile, Mr. Agonia said the country’s elevation to an upper-middle income country (UMIC) and good standing within the Institute of International Finance’s (IIF) investor relations rating can also help attract more investments.
“For now, the country’s transition to UMIC status and its favorable rating on the IIF’s list are tangible tailwinds for the local economy’s foreign investment picture,” he said. “For this to take off within the medium to long run, nonetheless, the country may have to conduct structural reforms to deal with governance issues and the domestic economy’s inherent vulnerability to external shocks.”
Earlier this month, the World Bank reclassified the Philippines to upper-middle income from lower-middle income, after the country reached a gross national income per capita of $4,850, inside the World Bank’s GNI per capita range for UMICs of $4,636 to $14,375.
The Philippines also scored 49.3 out of fifty in investor relations within the IIF’s 2026 Investor Relations and Debt Transparency Report, outperforming 56 other countries to earn the highest spot within the category.
The central bank earlier said that the cautious global investment climate and native governance issues could bring FDI net inflows to $7 billion this 12 months, lower than the estimated $7.8 billion in 2025.
Nonetheless, it sees a gradual but uneven recovery by next 12 months, with FDI net inflows projected to achieve $8 billion by end-2027.
FDIs consult with cross-border investments by which a nonresident investor holds at the least 10% equity in a resident enterprise. These may take the shape of equity capital, reinvestment of earnings and intercompany borrowings.
The BSP’s FDI data reflect actual investment flows. This differs from the Philippine Statistics Authority’s approved foreign investment data, which represent investment commitments that will not necessarily be realized inside the reference period.