By Katherine K. Chan, A reporter
NET INFLOWS of direinvestment (FDIs) in The Philippines fell nearly 31% year-over-year in February, the Bangko Sentral of the Pilipinas (BSP) said.
Preliminary BSP data showed net FDI inflows fell 30.99% to $590 million in February from $855 million in the same month last year.
However, month-on-month, FDI inflows increased by 33.18% from $443 million recorded in January, marking the highest monthly level in three months.
“Foreign direct investment in the Philippines generated an income of $590 million by February 2026,” the BSP said in a statement on Monday.
“The United States was the leading source of FDI, while companies engaged in financial services and insurance were the largest recipients of FDI during the month,” it added.
The lower February figure came amid a 39.12% year-on-year drop in net investment in debt instruments to $414 million from $680 million previously.
Investments in mutual fund stocks, on the other hand, rose 1.14% to $177 million from $175 million last year.
Reinvestment of earnings also increased 11.94% year over year to $75 million from $67 million.
However, foreign investment in equity excluding reinvestment of earnings stood at $101 million, 6.48% lower than the $108 million recorded in February 2025.
Equity inflows fell 24.49% year over year to $111 million from $147 million, while withdrawals fell 74.36% to $10 million from $39 million.
Analysts say cautious investor sentiment amid global risks and subdued interest rates is likely to drag down net FDI inflows in February.
“The decline of the year shows how global investors have been cautious amid the wars, high borrowing costs, and uncertainty in other countries, while the rebound since January suggests that the capital has not left the Philippines but is becoming more selective and more sensitive at the time,” said SM Investments Corp. Group Economist Robert Dan J. Roces in a Viber message.
Meanwhile, Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said the global storms have affected investors' risk appetite and pushed them to postpone overseas investments.
“Domestically, limited GDP (gross domestic product) growth and persistent inflationary pressures have reduced the country's attractiveness by increasing operating costs and reducing return expectations,” he said via Viber.
The Philippine economy weakened for the third consecutive quarter in the January to March period, with GDP growth slowing to a 2.8% drop.
Inflation, on the other hand, breached the BSP's target for the second consecutive month. It stood at 4.1% in February and rose to a more than three-year high of 7.2% in March.
However, beyond the net amount of FDI inflows, Mr. Roces noted that it is very important to track whether such investments support long-term initiatives, including infrastructure, digital services, production shifts and procurement.
DEATH OF TWO MONTHS
In the first two months of 2026, aggregate net FDI inflows fell by 34.79% to $1.033 billion from $1.584 billion in the year-ago period.
The bulk of equity capital inflows during that period came from Japan, the United States and Singapore, and were “concentrated in the manufacturing, financial and insurance industries, as well as real estate,” the BSP said.
Central bank data showed investments in stocks and mutual fund shares fell 22.34% to $299 million at the end of February from $385 million a year earlier.
Total investment in equity capital excluding reinvestment of profits stood at $171 million during this period, down 12.76% from $196 million in the first two months of 2025.
Once discounted, equity placements fell 18.07% to $204 million from $249 million last year, while withdrawals fell 39.62% to $32 million from $53 million.
Meanwhile, reinvestment of non-residents fell by 32.28% to $128 million in the two-month period from $189 million last year.
Total investment in debt instruments likewise decreased by 38.78% year-on-year to $734 million from $1.199 billion previously.
Analysts say the Philippines may begin to feel the impact of the Middle East conflict on foreign investment flows in the coming months amid higher oil prices and continued global uncertainty.
“The conflict in the Middle East may delay investment decisions if oil prices remain high and volatility continues, but unless it turns into a wider global disruption, the main effect may be to delay commitments rather than completely reverse investor interest,” said Mr Roces.
The conflict in the Middle East, which has disrupted global oil trade and damaged key energy infrastructure in the region since late February, remains unresolved.
Meanwhile, Mr. Asuncion said FDI inflows may gradually return later this year if financial conditions improve and inflationary pressures subside.
“Going forward, FDI inflows are likely to remain subdued in the near term amid ongoing global and macroeconomic uncertainty, but may gradually stabilize in the latter half of 2026 if financial conditions improve and inflationary pressures are limited,” he said.
“In the medium term, structural forces such as positive demographics, a strong services sector, and continued investment reforms should support a moderate recovery in FDI, although not a sharp rebound,” he added.
FDIs refer to cross-border investments where a non-resident investor holds at least 10% of the shares of a resident enterprise. This may take the form of equity capital, reinvestment of earnings and corporate loans.
The BSP's FDI data reflects the actual flow of money. This is different from the Philippine Statistics Authority's data on foreign investment, which represents investment commitments that may not actually materialize during the reference period.
The central bank expects FDI inflows to reach $7.5 billion this year.
