By Abigail Marie P. Yraola, Deputy Research Head
Approved overseas investments in the Philippines decreased by 38.9% last year to P543.62 billion, marking the most substantial drop in four years, according to the Philippine Statistics Authority’s report on Thursday.
Initial figures from the PSA revealed that the worth of foreign commitments sanctioned by the nation’s investment promotion agencies (IPAs) in 2024 was less than the P889.24 billion registered in 2023.
The year-on-year decline in foreign investments is the most significant since the 71.3% decrease noted in 2020.
In the three months leading up to December, pledges totaled P57.70 billion, down 85.4% from P394.46 billion during the same time in 2023.
This represents the sharpest reduction in over 26 years, since the 94.5% drop in the third quarter of 1998. In terms of value, it is the lowest since P27.46 billion recorded in the third quarter of 2023.
According to economist Reinielle Matt Erece from Oikonomia Advisory & Research, Inc., “The primary reason for the significant decline in foreign investments for the quarter is global uncertainty resulting from geopolitical tensions,” he stated in an email.
He further noted that the campaign and eventual victory of US President Donald J. Trump, along with his policies—which include tariff hikes, tight immigration measures, and various trade reforms—have made investors reluctant to put their money in countries outside of their own.
“Foreign investors are cautious as they maintain their capital, re-evaluating global risk factors, and are in a ‘wait and see’ phase regarding the current developments in the global economy,” Mr. Erece expressed.
Additionally, he remarked that the latest data on approved foreign investments has implications for the country’s growth trajectory. While unemployment figures remain comparatively low and stable, economic sentiment is adversely affected by growth data that is expected to resonate throughout this year.
“Investors will be troubled by sluggish consumption growth, and combined with global uncertainty, this will make them even more reluctant to invest in the country,” he stated.
The Philippine economy grew by 5.2% in the fourth quarter of 2024, marking the slowest growth rate in six quarters, the last being 4.3% in the second quarter of 2023.
This development brought the nation’s gross domestic product (GDP) to 5.6% for 2024, falling short of the revised government target of 6-6.5%.
Conversely, the country’s unemployment rate decreased to 3.1% in December, bringing the full-year average down to a record low of 3.8%, representing 1.94 million Filipinos without jobs.
The December statistic was the lowest since April 2005, when the statistics authority changed its definition of unemployed individuals to Filipinos aged 15 years and older who are jobless, available for employment, and actively looking for work.
Five IPAs—Board of Investments (BOI), BOI-Bangsamoro Autonomous Region in Muslim Mindanao (BOI-BARMM), Clark Development Corp. (CDC), Philippine Economic Zone Authority (PEZA), and Subic Bay Metropolitan Authority (SBMA)—approved investment commitments in the fourth quarter.
Switzerland emerged as the leading source of investment pledges for 2024, committing P289.06 billion, which accounts for 53.2% of the total. This was followed by South Korea with P100.34 billion (18.5% share) and the Netherlands with P50.22 billion (9.2% share).
In the fourth quarter, South Korea led with the highest approved investments at P26.16 billion, which comprised 45.3% of the total P57.70 billion in pledges. The Netherlands followed with P9.19 billion (15.9% share) and Japan with commitments of P4.11 billion (7.1% share).
The BOI accounted for the largest percentage, representing 70.7% of the foreign investment pledges, amounting to P384.44 billion last year.
In the final three months of 2024, the BOI reported the most significant commitments totaling P28.10 billion, followed by PEZA with P15.44 billion.
SBMA and CDC approved P13.64 billion and P445.10 million in pledges, respectively, while BOI-BARMM sanctioned P86.66 million in commitments.
During this period, the Authority of the Freeport Area of Bataan, Bases Conversion and Development Authority, Cagayan Economic Zone Authority, Clark International Airport Corp., Poro Point Management Corp., John Hay Management Corporation, Tourism Infrastructure and Enterprise Zone Authority, and Zamboanga City Special Economic Zone Authority did not approve any investment pledges.
In 2024, approximately 62.8% or P341.50 billion of the total approved foreign investments will be allocated to the energy sector.
Simultaneously, from October to December, the manufacturing sector attracted the largest amount of approved foreign investments at P30.55 billion, approximately 52.9% of the total pledges in that timeframe.
Moreover, about 20.6% or P11.87 billion of the sanctioned foreign investments will be directed toward the transportation and storage sector, while 13.3% or P7.68 billion will be invested in the energy sector.
During this timeframe, 34.5% of these foreign investment commitments amounting to P19.92 billion will be focused on projects in Central Luzon.
Calabarzon (Cavite, Laguna, Batangas, Rizal, and Quezon) secured P13.51 billion worth of investment commitments, while Metro Manila will receive P12.86 billion.
In 2024, Calabarzon attracted around P195.67 billion in these investment pledges.
If these foreign commitments come to fruition, the projects are anticipated to create 39,284 jobs, a 20.3% increase compared to the 23,726 jobs projected a year earlier.
Mr. Erece indicated that while it is still premature to forecast a slowdown in job creation, it is crucial for policymakers to implement measures to avert this slowdown and entice more investments to promote job growth and accelerate economic expansion.
“Some of the initiatives that policymakers could take include implementing a more accommodating monetary policy, such as a timely rate reduction,” Mr. Erece suggested.
Although this could eventually lead to a depreciation of the Philippine peso, particularly against the US dollar, he added that the “economy relies much more on domestic consumption and spending; therefore, a rate cut would enhance market sentiment and encourage expenditures from both businesses and consumers within the country.”
In its inaugural policy meeting last Thursday, the Bangko Sentral ng Pilipinas (BSP) opted to maintain rates at 5.75%.
The central bank had reduced rates by a total of 75 basis points last year.
In the fourth quarter, aggregate investment commitments from both foreign and Filipino nationals fell by 36.1% to P373.70 billion, down from P585.17 billion in the same quarter of 2023. Filipino investment pledges reached P316 billion in the last quarter, accounting for 84.6% of the total.
Mr. Erece anticipates rising tensions in global trade and a halt in rate cuts by the BSP amid slower growth projected for 2025, stating that “optimism for a growth in investments this quarter is lacking.”
Nonetheless, he noted that being an economy primarily driven by domestic consumers and businesses provides a distinct advantage in this volatile global scenario.
“Encouraging consumption through fiscal expenditures and a lenient monetary policy can enhance business sentiment, thus attracting further foreign investments to the nation,” he stated.
The PSA data regarding foreign investment commitments, which may materialize soon, differs from actual foreign direct investments tracked by the BSP. The central bank’s oversight encompasses more than merely projects, incorporating additional elements like reinvested earnings and loans to Philippine affiliates via their debt instruments.
