June FDI net inflows sink to six-month low

Net inflows of foreign direct investments (FDI) sank to a six-month low in June, with the first-half tally also posting a double-digit drop, as global trade risks continued to weigh on market sentiment, resulting in a net outflow of equity capital.

FDI net inflows decreased by 17.8% to USD 376 million in June from USD 457 million in the same month last year, preliminary data from the Bangko Sentral ng Pilipinas (BSP) released on Wednesday showed.

This was the lowest net inflow in six months or since the USD 356 million recorded in December.

Month on month, FDIs plunged by 37.1% from the USD 598-million inflow in May.

“Net foreign direct investments into the Philippines remained positive in June, with inflows from Japan and into manufacturing taking the lead,” the BSP said.

“The slowdown in FDI net inflows during the month reflected the shift in nonresidents’ net investments in equity capital (other than reinvestment of earnings), from USD 85 million inflows to USD 57-million outflows,” it said.

June marked the first time that the country saw a net outflow in equity capital excluding reinvestments in one-and-a-half years or since the USD 11-million outflow in January 2024.

This came as equity placements rose by 31.3% year on year to USD 130 million in the month from USD 99 million, while withdrawals ballooned to USD 187 million from USD 15 million.

Equity capital placements in June mostly came from Japan (62%), the United States (16%), and South Korea (9%). Most of these flowed into the manufacturing sector (64%), followed by real estate activities (14%), and wholesale and retail trade and repair of motor vehicles and motorcycles (10%).

Meanwhile, reinvestment of earnings jumped by 36.7% to USD 128 million from USD 94 million.

Nonresidents’ net investments in debt instruments also went up by 9.3% to USD 305 million in June from USD 279 million in the same month a year ago.

“June’s FDI slowdown reflects a mix of global and domestic headwinds,” Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in a Viber message. “Heightened global uncertainty, trade tensions, and cautious investor sentiment weighed on cross-border investments, while structural challenges at home — such as infrastructure gaps and policy unpredictability — added to the drag.”

“The US tariffs hurt — especially our manufacturing sector — but it’s also about weak global trade and our own policy gaps,” Jonathan L. Ravelas, senior adviser at Reyes Tacandong & Co., said in a Viber message.

In June, global markets were hit by volatility as the sudden escalation of the conflict between Iran and Israel due to an exchange of attacks drove up oil prices. The two countries eventually reached a ceasefire.

Investors were also awaiting the finalization of trade deals between the United States and its trading partners ahead of an initial July deadline, which was eventually extended.

The US is now imposing a 19% import tariff on Philippine goods under the deal secured by the government.

However, US President Donald J. Trump has also threatened to impose additional duties on semiconductors as well as countries with digital taxes, which could affect the country.

First six months

For the first half of the year, net FDI inflows into the Philippines dropped by 23.8% to USD 3.418 billion from USD 4.486 billion.

Investments in equity capital, other than the reinvestment of earnings, plummeted by 74.6% to USD 307 million in the period from USD 1.207 billion a year ago.

Broken down, gross equity placements plunged by 49.3% year on year to USD 746 million, while withdrawals jumped 67.2% to USD 439 million.

Japan accounted for the bulk of the equity investments in the period at 43%, followed by the US (20%), Singapore (12%), and South Korea (8%). Half (50%) went to manufacturing, while 19% went to real estate activities and 10% went to financial and insurance activities.

Meanwhile, foreigners’ reinvestment of earnings climbed by 11.6% to USD 573 million from USD 514 million.

Net investment in debt instruments decreased by 8.2% to USD 2.538 billion in the six-month period from USD 2.765 billion a year ago.

The BSP expects net FDI inflows to reach USD 7.5 billion this year.

Mr. Asuncion said reaching this could be “challenging” as the six-month tally remains low.

“A significant rebound in the second half is needed, supported by stronger project implementation and improved investor confidence. Without these, inflows could fall short of the forecast,” he said.

“We expect FDI inflows to remain subdued in the near term as global risks persist and competition for capital intensifies across the region. Any upside will hinge on accelerated infrastructure rollout and policy clarity to boost investor confidence. While opportunities remain in manufacturing and real estate, downside risks dominate the outlook.”

Mr. Ravelas said the sharp drop in FDIs is a “wake-up call.”

“Investors are watching how we respond. If we don’t fix logistics, clarify rules, and build confidence, this could turn into a trend. But there’s still time to turn things around.” — Katherine K. Chan