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By Katherine K. Chan, reporter
NET INFLOWS of overseas direct investments (FDI) into the Philippines decreased in July yet reached their peak level in a year, the Bangko Sentral ng Pilipinas (BSP) announced on Friday.
FDI net inflows fell by 7.5% to $1.268 billion in July compared to $1.37 billion in the corresponding month last year, although this was the highest monthly figure recorded since.
Conversely, on a month-to-month basis, FDIs soared from the $376-million net inflow reported in June.
“Net overseas direct investments into the Philippines stayed positive in July 2025, with inflows from Japan and into wholesale and retail trade leading the way,” the BSP mentioned in a statement.
It also indicated that the year-on-year decline was primarily due to the 39.4% reduction in net investments by foreigners in debt instruments, dropping to $711 million from $1.172 billion the previous year.
This decline was mitigated by the 181.7% increase in nonresidents’ overall investments in equity and investment fund shares, rising to $557 million from $198 million.
When analyzed, net foreign investments in equity capital excluding reinvested earnings surged by 450.6% to $418 million in July from $76 million last year.
This occurred as equity placements escalated by 241.7% to $460 million from $135 million, while withdrawals decreased by 28.4% to $42 million from $59 million.
The majority, or 89%, of the equity capital placements in July originated from Japan, with 8% coming from the United States.
These funds were predominantly channeled into wholesale and retail trade (73%), followed by manufacturing (12%), and real estate activities (8%).
In contrast, reinvestment of earnings rose by 14.3% year on year to $139 million from $122 million.
The one-year peak in FDI net inflow registered in July was “primarily driven by inter-company borrowings and reinvested earnings, indicating sustained confidence from current investors despite global uncertainty,” stated Union Bank of the Philippines (UnionBank) Chief Economist Ruben Carlo O. Asuncion in a Viber message.
In July, the Philippines secured a trade arrangement with the United States following a state visit by President Ferdinand R. Marcos, Jr. to Washington, obtaining a 19% “reciprocal” import tariff. Other nations also established agreements with the US ahead of an initial July 9 deadline, which was eventually postponed.
JANUARY TO JULY
In the initial seven months, FDI net inflows diminished by 20% year on year to $4.685 billion
from $5.856 billion, as per BSP data.
This decline coincided with a 17.5% drop in nonresidents’ net investments in debt instruments, decreasing to $3.248 billion from $3.937 billion.
Foreign investments in equity capital, excluding reinvested earnings, also plummeted by 43.5% to $724 million during the period compared to $1.283 billion a year earlier.
Breaking it down, placements dropped by 24.9% year on year to $1.206 billion from $1.605 billion, while withdrawals increased by 49.7% to $481 million from $322 million.
Equity capital placements during this period were predominantly sourced from Japan (60%), the United States (15%), Singapore (8%), and South Korea (5%).
The manufacturing sector captured 36% of the total, while 30% went to wholesale and retail trade, and 15% to real estate activities.
The BSP anticipates FDI net inflows to reach $7.5 billion this year.
Mr. Asuncion expressed that achieving this would be challenging as investment inflows remain below expected levels.
“The recent BSP rate reduction, aimed at fostering growth amidst declining inflation and soft external demand, could enhance investor sentiment and financing conditions, but structural reforms and consistent policies will continue to be crucial in attracting new equity inflows,” he added.
Security Bank Chief Economist Angelo B. Taningco noted that he expects the “sluggish” performance of foreign direct investments to continue due to the ongoing corruption scandal.
“The governance challenges linked to corruption investigations in government flood control projects have likely undermined investor sentiment and business confidence, which could, in turn, temper FDI inflows for the remainder of the year,” he stated in an email.
On Thursday, the BSP implemented a surprise 25-basis-point (bp) cut, lowering the policy rate to a three-year low of 4.75%, emphasizing the need to support the economy as growth prospects have weakened due to the effects of the ongoing corruption scandal on business sentiment and government expenditures.
This represents its fourth consecutive quarter-point reduction since April. The Monetary Board has now slashed benchmark borrowing costs by 175 bps since commencing its easing cycle in August 2024.
BSP Governor Eli M. Remolona, Jr. mentioned that another rate cut is feasible during their last policy meeting for this year on Dec. 11, with further reductions also on the agenda.
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