Approved foreign investments lowest in over a year

Approved foreign investments in the Philippines slumped further by 82% in the first quarter to the lowest in one-and-a-half years, according to the local statistics agency, as US President Donald J. Trump tries to undo decades of global economic integration through his sweeping tariff increases.

Foreign investment commitments approved by the country’s investment promotion agencies plunged to PHP 27.99 billion from PHP 155.26 billion a year earlier, according to data from the Philippine Statistics Authority (PSA) posted on its website on Thursday.

This was also 51.5% lower than a quarter earlier and the lowest since the PHP 27.46 billion logged in the third quarter of 2023.

“The main reasons are the geopolitical uncertainties and trade disruptions caused by Trump’s tariffs,” Calixto V. Chikiamco, president at Manila-based Foundation for Economic Freedom, said in a Viber message.

“These factors are aggravating the already dire unfavorable climate for foreign investments, from high food inflation to lack of infrastructure and internal political divisions,” he added.

While Mr. Trump’s announcement of sweeping reciprocal tariffs on US trade partners did not come until April, he had threatened to increase duties during his campaign last year.

He later suspended these tariffs for 90 days starting April 9, imposing a 10% base tariff instead until July, pending negotiations.

South Korea was the leading source of foreign investment pledges, with commitments hitting PHP 12.36 billion or 44.2% of the total. The US followed with PHP 3.08 billion (11%) and China with PHP 2.88 billion (10.3%).

Real estate activities attracted the biggest share of foreign investments at PHP 10.79 billion (38.5%), followed by manufacturing at PHP 6.14 billion (21.9%) and administrative and support services at PHP 5.35 billion (19.1%).

The impact of lower investment pledges on Philippine economic growth would be limited, Mr. Chikiamco said, noting how the economy continues to rely on consumption and government spending rather than investment.

Economic growth in the first quarter was slower than expected at 5.4%, below the government’s 6-8% target for the year.

The Philippine Economic Zone Authority approved PHP 17.85 billion in foreign investments, accounting for 63.8% of the total. The Board of Investments (BoI) came in second with PHP 7.29 billion or 26% of the total, followed by the Bases Conversion and Development Authority with PHP 1.91 billion and the Subic Bay Metropolitan Authority with PHP 476.95 million.

Central Luzon had 53.3% of total foreign investment commitments at PHP 14.9 billion, followed by Metro Manila at PHP 6.78 billion and the Calabarzon (Cavite, Laguna, Batangas, Rizal and Quezon) Region with PHP 3.95 billion.

Foreign and local investments pledged during the quarter are expected to generate 31,848 jobs once the projects are realized.

On the other hand, investment pledges from Filipino nationals fell 8.4% to PHP 153.94 billion in the first quarter, the PSA said.

Mr. Chikiamco said the local political situation could affect foreign investment pledges in the next quarters.

Investors would want to know “whether President Ferdinand R. Marcos, Jr. has enough political capital, given the results of the midterms, to push for more economic reforms in the remaining years of his term,” he added.

He said the state should liberalize foreign investment laws, expand public-private partnerships in infrastructure and reform education to boost workforce quality to counter the foreign investment decline.

It should also boost farm output to lower food prices and ease wage pressures, modernize labor rules and pursue free trade deals with the European Union, Canada and the US while seeking membership in the Japan-led Comprehensive and Progressive Free Trade Agreement for Transpacific Partnership, he added.

PSA data on foreign investment pledges differ from actual foreign direct investments tracked by the Philippine central bank, whose data go beyond projects and include reinvested earnings and lending to Philippine units through their debt instruments. – Pierce Oel A. Montalvo, Researcher