By Katherine K. Chan, A reporter
PHILIPPINES may meetcontinue to struggle to attract foreign countries direct investment (FDI) of the remainder of 2026 as national and domestic risks governance issues keep inveswatch out, analysts say.
“We may have to face lower FDI growth until the end of the year,” Marco Antonio C. Agonia, an economist at the University of Asia and the Pacific (UA&P), told. BusinessWorld by email. “To domestic economy is vulnerable to external shocks and so far it has not but it solved its administrative problems.”
Mr. Agonia noted that the high cost of borrowing has also hampered investment growth, causing the Philippines to lag behind its neighbors in terms of business climate.locations and conditions of investment.
In April, the Philippines saw the lowest level of FDI inflows in nearly 10 years, with central bank data showing a year-on-year decline of 58.8% to $250 million from $607 million.
This marked the lowest monthly FDI inflow since $244 million in June 2016, and the biggest annual decline since 76.1% in December 2022.
The decline in FDI inflows comes amid growing uncertainty over the Middle East war, although SM Investments Corp. Group Economist Robert Dan J. Roces noted that this may be largely due to less corporate borrowing.
“However, if the economic downturn continues, it may result in capital formation, job creation and productivity, especially in manufacturing, infrastructure, energy, construction and export industries,” said Mr. BusinessWorld via Viber.
He expects FDI inflows to remain muted and uneven throughout the year as investors remain wary of external and domestic headwinds.
In the first four months of the year, the Philippines posted $1.968 billion in net FDI inflows, 26.5% less than the $2.675 billion in the same period last year.
Mr. UA&P’s Agonia said this economic downturn could hamper economic growth as less investment reduces overall demand and can eventually destroy it. the productive capacity of the country.
“The new decline in net FDI inflows will hurt the country’s growth,” he said.
“In the near term, slow investment means low demand. In the medium to long term, however, the slow formation of FDI translates into low development of the economy’s productive capacity, harming the country’s prospects for transformative growth,” he added.
The quality of the Philippine economy has been weak since late last year, as widespread corruption in flood management affected investor sentiment, reducing the flow of investment into the country. Gross domestic product (GDP) growth slowed to 4.4% in 2025 from 5.7% in 2024.
Economic instability caused by the war in the Middle East dashed hopes for a Philippines recovery, as GDP growth fell to a new post-pandemic low of 2.8% in the first quarter.
This prompted economic managers to lower the GDP growth rate to 3.5-4.5% this year from 5-6% previously.
Mr. Agonia said low FDI inflows could affect knowledge and capital-intensive sectors, including transportation, infrastructure, manufacturing, renewable energy, and high-value production in the agricultural sector.
“In particular, the net investment of the debt instrument has been declining in recent months, which could undermine development in infrastructure and production,” he added.
Meanwhile, Jonathan L. Ravelas, senior consultant at Reyes Tacandong & Co., said the continued inflow of equity investments suggests that investors remain bullish on the Philippines.
“While this may weigh on investment, jobs, and long-term growth if it continues, it is encouraging that equity investment remains positive, indicating that investors still see value in the Philippines,” he said. BusinessWorld in a Viber message.
Analysts say the government should make reforms to solve its administrative problems and ease of doing business to restore investor confidence.
“The key now is to strengthen policy consistency, improve ease of doing business, accelerate infrastructure development, and strengthen good governance to turn investors’ interest into real investment,” Mr. Ravelas.
The Philippines will also need an uncertain investment climate to attract more foreign investment in key industries, according to Mr. Roses.
“To change this, the country needs less uncertainty and faster implementation such as consistent laws, reliable governance, lower energy costs, and faster transformation of public projects that are already underway,” he said. “Investors can take price risk, but they struggle with unpredictable prices.”
Meanwhile, Mr. Agonia said the country’s rise to middle-income status (UMIC) status and good standing in the Institute of International Finance’s (IIF) investor relations rating would also help attract more investors.
“Currently, the country’s transformation into a UMIC and its good ranking in the IIF list are visible obstacles in the country’s economy for foreign investment,” he said. “For this to take off in the medium to long term, however, the country will have to make structural changes to address governance issues and the existing vulnerability of the domestic economy to external shocks.”
Earlier this month, the World Bank reclassified the Philippines to middle income from lower middle income, after the country reached a per capita income of $4,850, between the World Bank’s GNI per capita in UMICs of $4,636 to $14,375.
The Philippines also scored 49.3 out of 50 on investor relations in the IIF’s 2026 Investor Relations and Debt Transparency Report, outperforming 56 other countries to earn the top spot in the category.
The central bank earlier said a cautious global investment climate and domestic governance issues could bring FDI inflows to $7 billion this year, down from an estimated $7.8 billion in 2025.
However, it sees a gradual but uneven recovery next year, with net FDI inflows expected to reach $8 billion by the end of 2027.
FDIs refer to cross-border investments where a non-resident investor holds at least 10% of the shares of a resident enterprise. This may take the form of equity capital, reinvestment of earnings and corporate loans.
The BSP’s FDI data reflects the actual flow of money. This is different from the Philippine Statistics Authority’s data on foreign investment, which represents investment commitments that may not actually materialize during the reference period.
