FOREIGN DIRECT investments plunged during the first half of 2026 by 17.8% to $3.382 billion from last year’s revised $4.116 billion.
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.
This was due to lower intercompany borrowings and reinvested earnings, and a more cautious global investment environment, that pulled down the foreign capital that flowed into the Philippines in the first half of 2026.
Bangko Sentral ng Pilipinas (BSP) data showed FDI net inflows fell to $3.38 billion in the January to June 2026 period, from the $4.12 billion in the first half of 2025.
“The decline was driven by the decreases in both foreign net investments in debt instruments, which indicated lower intercompany borrowings, and reinvestment of earnings,” the BSP said in a statement on Thursday.
It explained that equity capital investments were higher in the first half of 2026 than in the same period in 2025.
But reinvestment of earnings declined by 19.4 percent to $829 million in the first half of 2026 compared to the $1.028 billion in the January to June 2025 period.
Net investments in debt instruments, which indicated lower intercompany borrowings, plunged to $2.063 billion in the first half of the year, 25.8 percent lower than the $2.781 billion recorded in the same period a year earlier.
In contrast, equity capital placements surged by 59.4 percent to $489 million in the January to June 2026 period, compared to the $307 million recorded in the first half of 2025.
The BSP said capital placements came primarily from Japan, the United States, and Singapore, according to a report of Business Mirror.
These funds, the BSP said, were funneled largely into the manufacturing, financial and insurance, and real estate industries.
Analysts’ View
Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines (UBP), said the decline in net FDI inflows in the first half of 2026 was “driven mainly by lower intercompany borrowings and reinvested earnings, consistent with a more cautious global investment environment.”
Asuncion explained that the month-on-month FDI decline—to $447 million investments in June alone, or down by nearly 30 percent compared to the $638 million in May 2026—“likewise reflects the inherent volatility of FDI flows, particularly financing transactions between parent companies and their affiliates.”
He pointed out that June inflows of $447 million which were 35.1 percent higher than the $331 million in June 2025 suggest that “foreign investors are still identifying opportunities in the Philippines despite external uncertainties.”
Experts’ Outlook
Looking ahead, Jonathan L. Ravelas, senior adviser at Reyes Tacandong & Co., said: “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.”
This was echoed by Michael L. Ricafort, chief economist at Rizal Commercial Banking Corporation (RCBC), who outlined the key reforms and initiatives needed to be put in place for the coming months and years to help attract more FDIs into the country.
“For the coming months/years, preparations related to Pax Silica and Luzon Economic Corridor provide a source of hope/bright spot for FDIs, in view of the framework approval during the Asean Leaders’ Summit in November 2026,” Ricafort said.
He also raised the need to adopt measures that would improve governance to boost investor sentiment in the country.
Ricafort added that key measures to use are the incentives being prepared for local electric vehicle (EV) production and other incentives in place including the (Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy) CREATE MORE.
Apart from merely implementing key reforms, Ricafort pointed to the need to lower the cost of business especially on electricity, which he described as “among the highest in Asean/Asia.”
Ricafort also said the country is in need of “more predictable policies” especially on taxation, pointing out the importance of “not changing the rules in the middle of the game.”
He highlighted the need for “continuity in policies even to the subsequent Philippine presidents/administrations.”
Asuncion said: “FDI performance will likely remain influenced by global growth prospects, geopolitical developments, and investor sentiment.”
“While ongoing conflicts, elevated global price pressures, and softer economic activity abroad could weigh on investment decisions, the Philippines’s relatively stable macroeconomic environment and continued investment opportunities should help support foreign investment inflows over the medium term,” he added.