By Katherine K. Chan, Reporter
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 $447 million in June from the revised $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 $638-million inflows in May.
June saw the lowest FDI net inflows in two months or since the $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 $78 million in June from $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 $52 million, although 8.9% lower than the $57-million outflows seen in June 2025.
Equity capital placements dropped by 13.8% year on year to $112 million in June from $130 million, while withdrawals fell by 12.3% to $164 million from $187 million.
On the other hand, reinvestment of earnings surged by 43.1% to $130 million in June from $91 million a year prior.
Net foreign investments in debt instruments also jumped by an annual 24.2% to $369 million in June from $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 P61-to-the-dollar level from the prewar level of P58 to P59 a dollar.
The local unit averaged P61.2513 versus the greenback in June, P4.8927 or about 8.7% weaker than the P56.3586 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 $3.382 billion from the revised $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 $1.319 billion in the six-month period, down by 1.2% from $1.335 billion in the year prior.
This as net foreign investments in equity capital, excluding reinvestment of earnings, grew by 59.4% to $489 million in the first semester from $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 $489 million against $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 $725 million from $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 $236 million in June from $439 million last year.
Meanwhile, reinvestment of earnings amounted to $829 million in the first half of 2026, down 19.4% annually from $1.028 billion.
BSP data also showed net investments in debt instruments declined by 25.8% to $2.063 billion during the period from $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 $7 billion from the estimated $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.