Net inflow of foreign direct investmentMents (FDI) fell to three-month low March, first quarter inflow Global uncertainty has increased, down more than 40% year-on-yearFrom the US tariff policy.
Preliminary data from Bangkok Sentral NG Pilipinas (BSP) shows net foreign direct investment inflows fell 27.8% from the same period a year ago to $498 million in March.
This is the lowest level of FDI in three months, or the inflow of $110 million since the December issue.
“The above decline is due to the low net inflows of all major FDI components,” BSP said.
Net investments by non-residents in local AF debt instrumentsfIliates in March fell to 31.6% to $329 million from $481 million in the same month of 2024.
Net investments in equity capital by non-residents, in addition to reinvestment in earnings, fell 27.4% from $141 million in the year to $102 million.
This is because equity capital relocation fell 5.5% to $148 million. On the other hand, withdrawals almost tripled (185.1%) to $46 million.
The equity arrangements for March were mainly from Singapore (25%), Japan (24%) and the United States (20%), as well as South Korea (9%) and Malaysia (5%).
“These are mainly injected into the real estate, manufacturing, finance and insurance, administrative and support services sectors,” the central bank said.
Reinvestment in March fell to 1.2% to $66 million from $67 million a year ago.
Investment in stocks and investment fund stocks fell 19% in March to $168 million, down from $208 million a year ago.
First quarter slideshow
In the first quarter, net foreign direct investment inflows fell to 41.1% to $1.76 billion from $2.99 billion of the same age.
Net investment in debt instruments fell 35.3% to $1.2 billion during the period to March.
In addition to reinvesting investments in equity capital, earnings investments on January March 3 fell 66.7% to $298 million, from $894 million in the previous year.
Equity resettlement fell 64.4% to $397 million in the year, while withdrawals fell 54.8% to $99 million.
These positions are mainly from Japan (42%), followed by the United States (17%), Singapore (14%), Malaysia and Singapore (6%) per person.
Nearly half (47%) of these are invested in manufacturing, followed by real estate (22%) and finance and insurance (13%).
On the other hand, non-resident reinvestment in earnings rose 8.8% from $242 million to $264 million.
“The decline in FDI is one of the different indicators, with the increase in debt and unemployment, which indicates a gradual decline in economic growth in the country,” said Leonardo A. Lanzona, professor of economics at Ateneo de Manila University.
In the first quarter, the Philippines’ economy grew by 5.4% more than expected, far below the government’s 6-8% target that year.
The total capital formation of the investment component of the economy grew 4% in the first quarter, slowing from 5.5% in the fourth quarter.
Mr Lanzona added: “The truth is that the country’s growth depends only on its remittances and consumption. So if global conditions are still poor, we wouldn’t expect FDIS to enter.”
John Paolo R. Rivera, a senior fellow at the Philippine Development Institute, said the decline in FDI was due to the combination of global and domestic headwinds.
“On the outside, geopolitical tensions, high interest rates in developed markets and rising global trade uncertainty, especially as US tariff actions continue to weaken cross-border investment.”
Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., pointed out that the U.S. government’s tariff policy has led investors to take a waiting stance on investment.
Since taking office in late January, U.S. President Donald J. Trump has begun posing a tariff threat. However, it was not until early April that he announced a baseline 10% tariff for all his trading partners and raised mutual tariffs in most trading partners. The so-called countdown tariffs were suspended until July.
Mr Rivera said investors may be more cautious in the first quarter and are now awaiting “policy guidance, implementation of post-election stable and long-term implementation of economic strategies”.
“Internally, the Philippines is with political noise, investors’ focus on regulatory predictability and the slow progress of structural reforms is necessary to strengthen long-term investor confidence.”
Mr Ricafort said in the coming months that the full implementation of corporate tax incentives for businesses to maximize the opportunity to revitalize the Economic Act could attract investors.
“Some foreign investors can also wait for the Fed and BSP rates to drop further before they can raise more FDI more aggressively,” he added.
BSP Governor Eli M. Remolona (Jr.) said that during the June 19 Monetary Commission policy review, lowering tax rates are still on the table.
It said that the BSP’s FDI data differed from investment data from other government resources covering actual investment flows.
The approved foreign investment data released by the Philippine Bureau of Statistics comes from investment promotion agencies and represents investment commitments that may not be fully realized within a given period. – Luisa Maria Jacinta C. Jocson
