October FDI Inflows Signal Heightened Policy and Governance Risks

PHILIPPINES - In Brief 13 Jan 2026 by Diwa Guinigundo

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Foreign direct investment (FDI) net inflows to the Philippines declined by 40 percent year on year in October 2025, falling to USD 642 million from USD 1.1 billion in October 2024. While inflows were higher than in the preceding three months, suggesting some short-term stabilization, the annual contraction reinforces concerns about a broader and more sustained softening in investor confidence. Recent governance developments, particularly the flood-control scandal and persistent concerns over corruption and weak public accountability, appear to be weighing heavily on investor sentiment. These issues have heightened uncertainty and encouraged a “wait-and-see” posture among foreign investors, undermining confidence in the medium-term economic outlook. By component, the decline was driven largely by a more than 50 percent drop in non-residents’ net investments in debt instruments, notably intercompany loans and related financing. Although this component is inherently volatile, such a sharp contraction signals reduced appetite for financing domestic business activity and weaker expectations of future profitability. The October outcome is not an isolated case. Similar year-on-year declines were recorded in August and September, pointing to a sustained moderation rather than a temporary setback. It is noteworthy that equity investments and reinvested earnings improved on an annual basis, indicating that foreign investors have not fully exited the Philippine market. However, these gains remain insufficient to offset the broader impact of policy uncertainty and governance risks. Absent decisive action to address corruption and strengthen policy credibility, investor risk premia...