Philippines sees 35% jump in FDI net inflows in June

Foreign direct investment (FDI) net inflows to the Philippines jumped by 35% year on year in June, even as they fell to a two-month low, central bank data showed.

Based on preliminary Bangko Sentral ng Pilipinas (BSP) data released on Thursday, FDI net inflows jumped by 35.1% to USD 447 million in June from the revised USD 331 million in the same month last year.

This was the second month in a row that FDI net inflows posted annual growth.

Month on month, it declined by 29.9% from the revised USD 638-million inflows in May.

June saw the lowest FDI net inflows in two months or since the USD 264 million in April.

FDIs refer to cross-border investments in which a nonresident investor holds at least 10% equity in a resident enterprise. These may take the form of equity capital, reinvestment of earnings, and intercompany borrowings.

BSP data showed investments in equity and investment fund shares more than doubled (129.4%) to USD 78 million in June from USD 34 million a year earlier.

However, nonresidents’ investments in net equity capital other than reinvestment of earnings returned to a net outflow after a year. Outflows reached USD 52 million, although 8.9% lower than the USD 57-million outflows seen in June 2025.

Equity capital placements dropped by 13.8% year on year to USD 112 million in June from USD 130 million, while withdrawals fell by 12.3% to USD 164 million from USD 187 million.

On the other hand, reinvestment of earnings surged by 43.1% to USD 130 million in June from USD 91 million a year prior.

Net foreign investments in debt instruments also jumped by an annual 24.2% to USD 369 million in June from USD 297 million previously.

Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said via Viber that the June FDI net inflows reflected the “inherent volatility of monthly investment flows, particularly in intercompany borrowing and reinvestment activity.”

Leonardo A. Lanzona, an economics professor at the Ateneo de Manila University, noted that the month-on-month decline in FDI net inflows was likely due to the US Federal Reserve’s higher rates and the strong dollar weakening the peso.

“Elevated US rates and peso depreciation likely reduced the incentive to route working capital through Philippine affiliates as debt, while falling reinvested earnings points to either compressed affiliate profitability (consistent with the 2.3% Q2 gross domestic product print, the weakest non-pandemic reading since 2009) or a shift toward repatriating profits rather than reinvesting — itself a soft confidence signal, compounded by the governance overhang from the flood control scandal,” he said in a Viber message.

Uncertainty over the Middle East war continued to ignite safe-haven demand for the greenback in June, dragging the peso to the PHP 61-to-the-dollar level from the prewar level of PHP 58 to PHP 59 a dollar.

The local unit averaged PHP 61.2513 versus the greenback in June, PHP 4.8927 or about 8.7% weaker than the PHP 56.3586 in the same month in 2025, according to BSP data.

First-half drop

In the first half of the year, FDI net inflows dropped by 17.8% to USD 3.382 billion from the revised USD 4.116 billion a year ago.

“Foreign direct investment net inflows fell in the first half of 2026 compared to the same period last year,” the central bank said in a statement.

“The decline was driven by the decreases in both foreign net investments in debt instruments, which indicated lower intercompany borrowings, and reinvestment of earnings,” it added.

Based on preliminary BSP data, investments in equity and investment fund shares reached USD 1.319 billion in the six-month period, down by 1.2% from USD 1.335 billion in the year prior.

This as net foreign investments in equity capital, excluding reinvestment of earnings, grew by 59.4% to USD 489 million in the first semester from USD 307 million a year ago.

“The 59% jump in equity capital is the more meaningful read on genuine new investment appetite, since it reflects fresh capital rather than balance-sheet shuffling,” Mr. Lanzona said. “But at USD 489 million against USD 3.4 billion total, it’s coming off a low base — real, but too small to offset the aggregate decline.”

Equity capital placements flowed mostly from Japan, the United States, and Singapore, which slid by 2.9% annually to USD 725 million from USD 747 million.

“These funds were channeled largely into the manufacturing, financial and insurance, and real estate industries,” the BSP said.

On the other hand, equity capital withdrawals plunged by 46.24% to USD 236 million in June from USD 439 million last year.

Meanwhile, reinvestment of earnings amounted to USD 829 million in the first half of 2026, down 19.4% annually from USD 1.028 billion.

BSP data also showed net investments in debt instruments declined by 25.8% to USD 2.063 billion during the period from USD 2.781 billion a year earlier.

Mr. Asuncion noted that global economic conditions, trade and geopolitical developments, as well as investor confidence, will likely remain the main drivers of FDI to the Philippines.

“Looking ahead, FDI prospects will likely depend on global economic conditions, trade and geopolitical developments, and investor confidence, although the continued rise in equity investments suggests that foreign investors remain interested in long-term opportunities in the Philippines,” he said.

Meanwhile, Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., said FDI inflows will likely remain subdued in the near term, with reforms seen as key in attracting foreign investments over the long term.

“Near-term FDI flows may remain soft, but the longer-term story will depend on how effectively the country converts reforms into actual investment projects,” he said in a Viber message.

For Mr. Lanzona, foreign investors might tread the country’s investment climate cautiously in the second half of the year, noting the government’s commitments which do not seem to be translating into “disbursed, labor-absorbing investments.”

“Absent a clearer BSP easing path, faster post-scandal infrastructure disbursement, and resolution on trade or tariff uncertainty, net FDI likely stays subdued, with equity capital the metric to watch for a genuine inflection,” he added.

For 2026, the central bank sees FDI net inflows sliding to USD 7 billion from the estimated USD 7.8 billion last year.

The BSP’s FDI data reflect actual investment flows. This differs from the Philippine Statistics Authority’s approved foreign investment data, which represent investment commitments that may not necessarily be realized within the reference period. — Katherine K. Chan, Reporter