Archives: Business World Article

Net inflows of foreign direct investments (FDIs) into the Philippines hit a four-month high in November, even as inflows slipped year on year, the Bangko Sentral ng Pilipinas (BSP) said.    

Preliminary BSP data released on Tuesday showed that FDI net inflows dipped by 0.3% to USD 897 million in November from USD 900 million in the same month in 2024.

Month on month, inflows jumped by 39.7% from USD 642 million in October.

November saw the highest FDI inflows in four months or since USD 1.271 billion in July.

“Foreign direct investments into the Philippines posted net inflows of USD 897 million in November 2025,” the central bank said in a statement. “South Korea was the leading source of FDIs, with most inflows directed to the manufacturing industry during the month.”

Based on BSP data, investments in equity and investment fund shares soared by 71.6% to USD 187 million in November from USD 109 million a year ago.

Net investments in equity capital other than reinvestment of earnings more than tripled to USD 122 million in November, from the USD 35 million logged in November 2024.

This, as equity capital placements doubled year on year to USD 142 million from USD 71 million, while withdrawals dropped by 44.4% to USD 20 million from USD 36 million previously.

Meanwhile, reinvestment of earnings stood at USD 64 million, down by 12.7% from USD 74 million a year earlier.

Net investments in debt instruments fell by 10.2% annually to USD 711 million in November from USD 791 million a year ago.

According to the BSP, net investments in debt instruments include mainly intercompany borrowing or lending between foreign direct investors and their subsidiaries or affiliates in the Philippines. The rest are investments made by nonresident subsidiaries or associates in their resident direct investors, or known as reverse investment.

SM Investments Corp. Group Economist Robert Dan J. Roces said the nearly flat year-on-year change in FDI net inflows reflects steady but still selective investor sentiment.

“(It) shows stabilization after a softer stretch,” he said in a Viber message. “Some delayed equity placements and reinvested earnings likely came through, which tells you investors are pacing commitments, not exiting.”

11-month slump

Meanwhile, FDIs went down by 22.1% to USD 7.077 billion at end-November from USD 9.084 billion in the same period last year.

“For the first eleven months of 2025, equity capital placements were sourced primarily from Japan, the United States, Singapore, and South Korea, and were channeled largely into the manufacturing, wholesale and retail trade, and real estate industries,” the central bank said. 

BSP data showed that investments in equity and investment fund shares reached USD 2.297 billion in the 11-month period, declining by 10.8% from USD 2.576 billion the year prior.

This, as net foreign investments in equity capital, excluding reinvestment of earnings, fell by 23.3% year on year to USD 1.144 billion during the period from USD 1.491 billion.

Of the total, placements dropped by 12.2% annually to USD 1.741 billion, while withdrawals rose by 21.1% to USD 596 million.

On the other hand, reinvestment of earnings edged up by 6.2% to USD 1.152 billion in the period ending November from USD 1.085 billion in the previous year.

However, nonresidents’ net investments in debt instruments of local affiliates amounted to USD 4.78 billion, down 26.6% from the USD 6.508 billion logged as of November 2024.

FDIs account for foreign investors’ investments in local businesses where they hold at least a 10% equity capital, as well as investments by a nonresident subsidiary or associate in its resident direct investor. It can be in the form of equity capital, reinvestment of earnings or borrowings.

The BSP’s FDI data cover actual investment flows, compared to the Philippine Statistics Authority’s foreign investments data which include investment commitments that may not be fully realized in a given period.

Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said the decline in FDI net inflows during the 11-month period shows that investors were more cautious last year.

“That mix suggests the Philippines hasn’t lost investor interest — sentiment just became more selective,” he said in a Viber message.

“The decline likely reflects global uncertainty, domestic policy noise, and tougher competition from our ASEAN (Association of Southeast Asian Nations) neighbors,” Mr. Ravelas added. “But the November bump signals that when investors see clearer direction and more stability, they begin to re‑engage.”

Mr. Roces said there could be annual growth in FDI inflows at the end of 2025 if companies log year-end reinvestments or intercompany loans, “but that will depend more on timing of flows than a sudden shift in confidence.”

Meanwhile, Mr. Ravelas said credible reforms, reduced uncertainty and faster execution could enhance the country’s investment climate.

“If the government sustains that clarity, we could turn that November momentum into a broader recovery,” he said. — Katherine K. Chan, Reporter

Freny C. Dongoya sells pares — Filipino comfort food made of braised beef in a sweet-savory soy sauce served with garlic fried rice — for PHP 120 (USD 2) a plate in Pasay City near the Philippine capital.

On most days, her customers are call center agents and motorcycle riders grabbing quick meals between shifts. She hasn’t raised prices despite higher food costs.

“If I increase prices, they stop coming,” she told BusinessWorld in Filipino. “Then I earn nothing.”

Ms. Dongoya works long hours, but she’s not counted in official job statistics. Like millions of Filipinos, she operates in the informal economy — without permits, tax registration or social protection.

Her situation captures the tension in the Philippine economy as it enters 2026.

Growth slowed sharply last year. Full-year expansion in 2025 eased to 4.4%, the weakest in 14 years excluding the pandemic. Infrastructure spending stalled and global trade softened. Yet officials continue to project confidence about reaching upper middle-income status.

On the ground, the picture looks uneven.

Outside business districts such as Bonifacio Global City and Ortigas, much of the workforce depends on low-paid, unstable jobs. Informal workers sell food, run small stores or take on casual labor. They cushion daily life for formal workers — but see little benefit from economic growth.

About 42% of the workforce or 20.6 million Filipinos remain in informal employment, according to estimates by IBON Foundation.

Christopher James R. Cabuay, an associate professor of economics at De La Salle University in Manila, said this helps explain why growth feels disconnected from household income.

“The current growth model is not structured to favor those in the informal sector,” he told BusinessWorld via teleconference.

“Most of the jobs we produce are in sectors like wholesale and retail trade or accommodation and food services. These employ many workers, but value-added per worker is small, so wages grow slowly,” he added.

Productivity gains are limited, and many workers stay near subsistence levels even during expansion years.

High-value sectors tell a different story. Business process outsourcing, finance and information technology earn in foreign currency and benefit from global demand. These industries helped stabilize growth during external shocks.

But their gains don’t spread evenly.

Analysts describe this as a two-track economy. One track is globally linked and relatively stable. The other is local, informal, and exposed to inflation and weak demand.

Warfredo Alejandro II works in the first track. The 27-year-old is a credit card specialist in the business process outsourcing sector. He has a steady paycheck and benefits. But he depends on the informal economy to manage daily costs.

He notes that affordable meals from vendors like Ms. Dongoya are the only way many employees can stretch their take-home pay.

“Street vendors make life affordable,” he said. “Without them, many employees would struggle to stretch their salaries.”

‘Hidden safety net’

Mom-and-pop stores and food stalls cluster around office towers for a reason. They sell cheap meals and essentials. For workers on entry-level wages, that matters.

Alellie B. Sobreviñas, an associate professor of economics at La Salle, said informal vendors act as an economic buffer for urban workers.

“They are a hidden safety net” especially for workers with long or irregular hours, she said in an e-mailed reply to questions.

When authorities clear sidewalks or relocate vendors without alternatives, costs rise quickly. Workers pay more for food. Commute times increase. Disposable income shrinks.

“That is an effective pay cut,” Ms. Sobreviñas said.

This does not mean informality is desirable, she said. Informal workers lack protection, access to credit and legal security. But removing them without replacing the services they provide creates pressures.

Formalization is often presented as the solution. In practice, it is costly.

For a small food vendor, registering a business requires multiple permits, fees and tax compliance. Costs can reach tens of thousands of pesos. For operators earning thin margins, that’s out of reach.

Ms. Dongoya pays her helpers PHP 400 to PHP 500 a day — below Metro Manila’s PHP 695 minimum wage, which only applies to formal jobs.

Mr. Cabuay said this creates another gap. Wage policies help those already inside the system. They do little for those outside it.

“The difference between what an informal worker earns and what they could earn in the formal jobs available to them is often not that large,” he said.

Many formal openings are also low skill: cleaners, service crew and laborers. They offer stability but limited wage gains. For some workers, informality still pays more.

This weak incentive slows formalization and keeps productivity low.

Economists warn that this structure limits long-term growth. Without stronger manufacturing and higher-value domestic industries, job quality will remain constrained.

Mr. Cabuay and his colleagues have raised concerns about government targets of 6% to 8% growth. Without upgrading jobs, growth will not translate into higher incomes for most workers.

Other barriers remain. Small firms struggle to access credit. Regulations are complex and public investment has been uneven.

The result is an economy that grows without lifting the base.

In business districts, consumption looks strong. Malls are busy and offices are full. But many households remain one shock away from hardship.

For informal workers, inflation hits first and hardest. Food and fuel costs rise, earnings don’t adjust quickly and savings are limited, yet their role remains essential.

Without informal vendors, entry-level formal workers would face higher living costs. Without informal transport, commutes would be longer. Without small retailers, neighborhoods would lose access to cheap goods.

The challenge is not choosing between formal and informal work. It is closing the gap between them.

That means lowering the cost of formalization, improving access to credit, and creating jobs that pay more because they produce more.

Until then, growth will continue to feel abstract for millions.

Ms. Dongoya doesn’t talk about gross domestic product targets. She watches foot traffic and rice prices.

“If customers disappear, I disappear,” she said.

For now, they keep coming. That says as much about the Philippine economy as any official forecast. — Erika Mae P. Sinaking

The peso could gain some support even amid some volatility in the foreign exchange market as the Philippines’ dollar reserves hit its highest level in over a year, analysts said.

“The relatively higher GIR (is seen) to provide a greater buffer for the peso exchange rate vs. the US dollar, as fundamentally supported by the continued growth in the country’s structural US dollar inflows especially from OFW (overseas Filipino worker) remittances, BPO (business process outsourcing) revenues, tourism receipts, foreign investments, among others,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in an e-mail.

This came after the country’s gross international reserves (GIR) stood at a 16-month high of USD 112.515 billion in January, climbing by an annual 8.95% from USD 103.271 billion a year ago, based on preliminary data from the Bangko Sentral ng Pilipinas (BSP).

It was the highest GIR level since the USD 112.707 billion recorded at end-September 2024.

Month on month, it went up by 1.52% from USD 110.833 billion in December.

Analysts said the uptick in foreign reserves was driven by higher dollar inflows as well as valuation gains from the central bank’s foreign investments and gold holdings.

“The jump in GIR mainly reflects stronger dollar inflows — from exports, BPOs, and remittances — alongside higher valuations of the BSP’s foreign investments and gold holdings, which helped push reserves to their highest in over a year,” Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said in a Viber message.

International reserves are the central bank’s foreign assets held mostly as investments in foreign-issued securities, foreign exchange and monetary gold, among others.

These are supplemented by claims to the International Monetary Fund (IMF) in the form of reserve position in the fund and special drawing rights (SDRs).

The BSP said the level of dollar reserves in January is enough to cover about 4.1 times the country’s short-term external debt based on residual maturity.

It also equates to 7.5 months’ worth of imports of goods and payments of services and primary income, more than double the three-month standard.

“The latest GIR level ensures availability of foreign exchange to meet balance of payments financing needs, such as for payment of imports and debt service, in extreme conditions when there are no export earnings or foreign loans,” the BSP said in a statement released late on Friday.

Preliminary central bank data showed that its gold holdings amounted to USD 20.667 billion at end-January, surging by 75.87% from the USD 11.751 billion seen a year ago. It also climbed by 11.25% from USD 18.578 billion at end-December.

However, the central bank’s foreign investments fell by 0.47% year on year to USD 85.966 billion in January from USD 86.368 billion a year ago, and by 1.11% from USD 86.926 billion a month ago.

Meanwhile, the Philippines’ reserve position in the IMF stood at USD 730.2 million, up by 8.77% from USD 671.3 million a year earlier and by 0.4% from USD 727.3 million in the previous month.

SDRs — or the amount the Philippines can tap from the IMF’s reserve currency basket — were 5.66% higher at USD 3.943 billion as of end January from USD 3.732 billion last year. It was unchanged from December.

On the other hand, the BSP’s foreign exchange holdings soared by 61.48% to USD 1.208 billion from USD 748.2 million the prior year and by 83.34% from USD 659 million at end-December.

“With GIR now comfortably above traditional adequacy metrics, it gives the BSP enough firepower to smooth volatility, reassure markets, and keep the peso from overshooting even when global conditions turn choppy,” Mr. Ravelas said.

Meanwhile, John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said the latest GIR level equips the BSP with ample resources to protect the peso from excessive fluctuations.

“While it cannot fully prevent depreciation driven by global USD (US dollar) strength and risk sentiment, the current reserve level helps anchor market confidence and allows calibrated intervention to prevent disorderly currency swings,” he added via Viber.

The local unit had a weak performance at the start of the year as it continued to trade around the PHP 58- to PHP 59-a-dollar level. On Jan. 15, it closed at PHP 59.46 against the greenback, breaking the previous record low of PHP 59.44 seen just the day prior.

On Friday, the local unit gained 10.5 centavos to close at PHP 58.585 versus the dollar from its PHP 58.69 finish on Thursday.

The BSP expects GIR to reach USD 110 billion by yearend. — Katherine K. Chan

 

The Department of Budget and Management (DBM) expects government agencies to submit lower funding proposals for 2027 amid stricter vetting guidelines triggered by the flood control corruption scandal.

Acting Budget Secretary Rolando U. Toledo said requests may come in below the PHP 11-trillion plan last year, after the agency issued stricter guidelines in its 2027 budget call in preparation for the National Expenditure Program (NEP).

“Yes, we expect (lower proposals), but we cannot prevent them from submitting more than what is supposed to be,” he told BusinessWorld on the sidelines of a University of the Philippines School of Economics event on Feb. 6.

“But of course, given the guidance we’re providing them, we hope the proposals will be lower,” he added.

The DBM began preparing the fiscal year 2027 budget through a series of budget forums with government agencies and government-owned and -controlled corporations late last month.

“We amplified the call to safeguard our budget from corruption,” Mr. Toledo said.

Safeguards include requiring agencies to secure approval from Regional Development Councils for priority programs and projects, reinforcing coordination among national agencies, regional offices, and local governments to prevent spending that is misaligned with administration priorities.

Additionally, the DBM mandates that proposals are backed by data, past performance metrics, and detailed program plans with clear procurement and implementation timelines and milestones.

“This ensures that only implementation-ready, high-impact proposals receive funding, reinforcing both equity and the effective allocation of public resources,” he said.

Mr. Toledo also pledged stricter oversight and reforms, saying agency heads will be required to certify accounts payables using signed, notarized documents to ensure projects are legitimate and not “ghost” transactions.

He also said the agency’s Technical Innovations for the NEP Application will automate the Executive’s budget tracking and formatting, significantly reducing the time and risk of discrepancies in report generation and review, which is expected to be rolled out in fiscal year 2028.

Risk of underfunding

Analysts said a sharp cut in 2027 budget proposals signal more disciplined spending but risk underfunding of key programs and misalignment with economic priorities.

Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said the stricter guidelines will likely force agencies to scale back their 2027 proposals, as the DBM continues to stress that fiscal space remains tight.

“Lower proposals could help ease fiscal pressure, but the challenge now is to cut the fat without starving essential programs — so agencies need to be smarter, not just smaller, in what they submit,” he told BusinessWorld in a Viber message.

Mr. Ravelas noted that corruption tied to anomalous flood control projects pushed the government toward a more disciplined, longer-term approach to budget preparation, with tougher validation.

However, Leonardo A. Lanzona, an economics professor at the Ateneo de Manila University, said that as the DBM tightens access to the budget, agencies may respond with fewer or smaller proposals, a move that doesn’t necessarily align spending with economic priorities or growth programs.

“You could end up with agencies abandoning worthwhile projects that support government economic goals simply because the access process is too burdensome, while the fundamental question of strategic resource allocation remains unaddressed,” he said in a Messenger chat over the weekend.

Mr. Lanzona said the lack of fiscal discipline amounts to “an austerity program without a clear goal,” warning it could cause delay rather than delivering meaningful budget reform.

John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said agencies may become overly cautious in budgeting, which may leave key infrastructure and social programs with less funding.

“While the corruption scandal may prompt more transparency and tighter justification of budgets, the shift will only be structural if reforms are institutionalized rather than treated as a short-term compliance response,” he said.

Unprogrammed appropriations

At the same event, Mr. Toledo rejected anew calls to remove unprogrammed appropriations (UA) from the national spending plan.

“The unprogrammed appropriation is not really a bad proposal, having that in the budget. What is wrong is how do we use unprogrammed appropriations,” he told reporters.

According to the DBM, the UA refers to funds that can be used only for specific projects when revenue collection exceeds targets or when additional grants or foreign funds are secured.

Mr. Toledo added that he will not recommend scrapping the UA, as many key projects are still awaiting approval. Without the UA, projects may delay implementation, he said.

“Just like for 2026, we have limited only to three particular lists of unprogrammed appropriations. One is for the foreign assistance project, the risk management program, plus the AFP (Armed Forces of the Philippines) modernization program,” he said.

Mr. Toledo also said he wants to continue limiting the standby funds to below 5% of the budget. — Aubrey Rose A. Inosante, Reporter