Foreign direct investments shrinking amid trade woes
Foreign direct investments (FDI) in the Philippines fell to the weakest level in half a year in June, underscoring how United States President Donald Trump’s protectionist trade agenda is unsettling investors far beyond American shores.
Latest data from the Bangko Sentral ng Pilipinas (BSP) showed that FDI inflows had beaten outflows by $376 million, a net gain. However, this was 17.8 percent lower compared with a year earlier and the smallest net inflow since December 2024’s $356 million.
For the first half of the year, foreign investment reached $3.4 billion—down almost a quarter from the same period in 2024 and less than half the central bank’s pared-down forecast of $7.5 billion for the entire 2025.
“The US tariffs hurt—especially our manufacturing sector—but it’s also about weak global trade and our own policy gaps,” said Jonathan Ravelas, senior adviser at Reyes Tacandong & Co.
Unlike foreign portfolio investments, which can flee at the first sign of trouble, FDI tends to be longer-term capital that can create jobs. The government has been seeking to draw more of such inflows while retaining those already here.
But data showed the Philippines had seen a net equity outflow in July, as fresh capital proved insufficient to offset the surge in funds leaving the country, underscoring the fragility of foreign investment at a time of rising global protectionism.
Central bank data showed that withdrawals of foreign equity had ballooned more than twelvefold from a year earlier to $187 million, overwhelming the $130 million in new capital that flowed in—even after a 31 percent increase. The result was a $57-million net outflow, reversing the net positive result a year ago.
But reinvested earnings kept overall investment in positive territory, climbing nearly 37 percent to $128 million. So did intercompany loans from multinationals to their Philippine subsidiaries, which rose 9 percent to $305 million and made up the bulk of inflows.
Ravelas said policymakers must swiftly move to arrest the decline in foreign investments, warning that the climate of global trade tension was already taking a toll.
“The sharp drop in foreign direct investments is a wake-up call,” he said.
“Investors are watching how we respond. If we don’t fix logistics, clarify rules and build confidence, this could turn into a trend. But there’s still time to turn things around,” he added.
