NET INFLOWS of foreign direct investments (FDI) fell to a three-month low in March, with first-quarter inflows also dropping by greater than 40% 12 months on 12 months, amid heightened global uncertainty arising from the US tariff policies.
Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed that FDI net inflows declined by 27.8% to $498 million in March from $689 million in the identical month a 12 months ago.
This was the bottom FDI level in three months or because the $110-million inflow posted in December.
“The said decline resulted from lower net inflows across all major FDI components,” the BSP said.
Nonresidents’ net investments in debt instruments of local affiliates plunged by 31.6% to $329 million in March from $481 million in the identical month in 2024.
Nonresidents’ net investments in equity capital, aside from the reinvestment of earnings, declined by 27.4% to $102 million from $141 million 12 months on 12 months.
This got here as equity capital placements dropped by 5.5% to $148 million. However, withdrawals nearly tripled (185.1%) to $46 million.
Equity placements in March mostly got here from Singapore (25%), Japan (24%) and america (20%), in addition to South Korea (9%) and Malaysia (5%).
“These were infused largely to the true estate; manufacturing; financial and insurance; and administrative and support services industries,” the central bank said.
Reinvestment of earnings dipped by 1.2% to $66 million in March from $67 million a 12 months ago.
Investments in equity and investment fund shares fell by 19% to $168 million in March from $208 million a 12 months earlier.
FIRST-QUARTER SLIDE
In the primary quarter, FDI net inflows plunged by 41.1% to $1.76 billion from $2.99 billion within the comparable year-ago period.
Net investments in debt instruments dropped by 35.3% to $1.2 billion within the period ending March from $1.85 billion a 12 months ago.
Investments in equity capital aside from the reinvestment of earnings plummeted by 66.7% to $298 million within the January-March period from $894 million within the previous 12 months.
Equity placements declined by 64.4% 12 months on 12 months to $397 million while withdrawals fell by 54.8% to $99 million.
These placements were mainly from Japan (42%), followed by america (17%), Singapore (14%), and Malaysia and Singapore (each at 6% each).
Nearly half (47%) of those were invested within the manufacturing sector, followed by real estate (22%) and the financial and insurance (13%) sectors.
However, nonresidents’ reinvestment of earnings rose by 8.8% to $264 million from $242 million.
“The decline in FDI is amongst different indicators, together with increasing debt and rising unemployment, that show the step by step decreasing economic growth within the country,” Leonardo A. Lanzona, an economics professor on the Ateneo de Manila University, said.
In the primary quarter, the Philippine economy grew by a weaker-than-anticipated 5.4%, well below the federal government’s 6-8% goal for the 12 months.
Gross capital formation, the investment component of the economy, grew by 4% in the primary quarter, slowing from the 5.5% seen within the fourth quarter.
“The reality of the matter is the country’s growth is barely depending on its remittances and consumption. Hence, if global conditions remain poor, we is not going to expect FDIs to are available in,” Mr. Lanzona added.
John Paolo R. Rivera, a senior research fellow on the Philippine Institute for Development Studies, said the drop in FDI is attributable to a mix of worldwide and domestic headwinds.
“Externally, rising geopolitical tensions, high rates of interest in developed markets, and global trade uncertainties especially from US tariff actions proceed to dampen cross-border investments,” he said.
Rizal Industrial Banking Corp. Chief Economist Michael L. Ricafort noted the US government’s tariff policies have led investors to adopt a wait-and-see stance on investments.
US President Donald J. Trump had began making tariff threats since he assumed office in late January. Nonetheless, it was only in early April that he announced a baseline 10% tariff on all its trading partners, in addition to higher reciprocal tariffs on most of its trading partners. The so-called reciprocal tariffs are suspended until July.
Domestically, Mr. Rivera said investors were likely more cautious in the primary quarter and are actually awaiting more clarity on “policy direction, post-election stability, and economic strategy execution in medium to long run.”
“Internally, the Philippines is contending with political noise, investor concerns over regulatory predictability, and slow progress in structural reforms which can be obligatory to spice up long-term investor confidence.”
For the approaching months, Mr. Ricafort said the complete implementation of the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy Act could entice investors.
“Some foreign investors could have also waited for Fed and BSP rates to go down further before becoming more aggressive to finance more FDIs,” he added.
BSP Governor Eli M. Remolona, Jr. has signaled further easing this 12 months, possibly through two more 25-basis-point (bp) rate cuts. He said a rate cut can also be still on the table on the Monetary Board’s policy review on June 19.
The BSP’s FDI data differ from the investment data of other government sources as they cover actual investment flows, it said.
The approved foreign investments data published by the Philippine Statistics Authority are sourced from investment promotion agencies and represent investment commitments that is probably not fully realized in a given period. — Luisa Maria Jacinta C. Jocson
