Foreign direct investment (FDI) net inflows into the Philippines dropped 41.1 percent in the first quarter of 2025 from a year earlier amid global and local economic headwinds.
FDI net inflows fell to $1.76 billion in the January-March quarter from $2.99 billion a year earlier, the Bangko Sentral ng Pilipinas (BSP) said on Tuesday.
Analysts said the sharp fall in foreign investment may be signaling global and local challenges that point to deeper economic concerns.
In March 2025 alone, FDI net inflows reached $498 million, marking a decline of nearly 28 percent from $689 million in March 2024.
March 2025 also saw a fall of more than 6 percent from the prior month’s $533 million.
The BSP traced the decline to a weaker performance across all major FDI components, underscoring both external and internal pressures weighing on investor sentiment.
“Nonresidents’ net investments in debt instruments fell to $329 million from $481 million a year earlier,” the central bank said in a statement.
Similarly, equity capital placements dropped to $102 million from $141 million, while reinvested earnings slightly decreased to $66 million from $67 million.
Complex mix of challenges
John Paolo Rivera, senior research fellow at the Philippine Institute for Development Studies, sees a complex mix of global and local challenges at play.
“Rising geopolitical tensions, elevated interest rates in developed economies, and uncertainty in global trade–particularly due to recent US tariff policies–are discouraging cross-border investments,” Rivera said.
On the domestic front, Rivera highlighted persistent regulatory ambiguity, political noise and sluggish progress in structural reforms as factors compounding investor hesitation.
While the Philippines remains attractive due to its market size and demographic strength, investors seem to have adopted a wait-and-see [stance], “seeking more clarity on policy direction and long-term economic strategy,” he said.
There is an urgent need to refocus on the ease of doing business, infrastructure development and fiscal sustainability to restore investor confidence and spur future capital inflows, Rivera added.
Deeper structural issues
Ateneo de Manila University economist Leonardo Lanzona warned that the drop in FDI could be symptomatic of deeper economic concerns.
“Along with rising unemployment and increasing national debt, the decline in FDI suggests that the country’s growth is gradually decelerating,” Lanzona said.
He doubted the government’s consistent claims of having the fastest growth in the region.
“The reality is that our economy still relies heavily on remittances and consumer spending, which are vulnerable to external shocks,” he said.
Lanzona urged the government to confront these structural limitations and focus on increasing the value-added output of key sectors such as agriculture and manufacturing.
Sources and distribution
The bulk of equity capital placements in March came from Singapore, Japan, the United States, South Korea and Malaysia.
These investments were primarily channeled into real estate, manufacturing, financial and insurance activities and administrative and support services, the central bank said.
FDI, by definition, involves direct investment by a nonresident in a Philippine-based enterprise, with at least 10 percent ownership.
It also covers investments made by foreign subsidiaries or associates in their local counterparts.
FDI vs commitments
The BSP clarified that its reported FDI data reflect actual capital inflows, distinguishing it from the investment commitments published by the Philippine Statistics Authority (PSA), which are based on reports by Investment Promotion Agencies.
“PSA figures represent pledged investments, which may not be realized within the same period, whereas BSP tracks actual disbursements,” the central bank said.
