Net foreign direct investment (FDI) inflows to the Philippines grew by 21.3 percent year-on-year in May, reaching US$586 million from US$483 million in the same month last year, according to data from the Bangko Sentral ng Pilipinas (BSP).
The uptick was largely driven by a significant 88.3 percent surge in nonresidents’ net investments in debt instruments, rising to US$427 million from US$227 million in May last year. The intercompany loans provided a liquidity boost to local firms, which could support business expansion and potentially stimulate consumption-related activity.
However, the gains were partially offset by a 61.4 percent decline in net equity capital investments (excluding reinvested earnings), which dropped to US$62 million from US$161 million, reflecting cautious investor sentiment in equity placements.
Despite the monthly rebound, cumulative FDI inflows for January–May 2025 fell 26.9 percent to US$3 billion, compared to US$4 billion in the same period last year. The decline signals ongoing challenges in sustaining long-term investor confidence amid external uncertainties.
Notably, FDI equity capital placements in May came predominantly from the United States, followed by Japan, Singapore, and South Korea. The manufacturing sector led investment destinations, alongside real estate and utilities (electricity, gas, steam, and air conditioning).
The short-term improvement in FDI could be read as a sign of recovering investor confidence, especially in debt-funded operations. However, the sharp fall in equity inflows and year-to-date contraction may call for stronger policy intervention to attract long-term capital—particularly through structural reforms, incentives, and regulatory stability.
The rise in debt-based FDI also adds to domestic liquidity, potentially supporting private sector spending and investment. If sustained, this could contribute to broader economic activity and bolster near-term consumption.
