The Philippines is expected to continue facing challenges in attracting foreign direct investment (FDI) for the remainder of 2026, analysts say.
Lingering geopolitical risks and domestic governance concerns are keeping investors cautious, which may lead to subdued FDI growth for the year, according to an economist at the University of Asia and the Pacific.
Higher borrowing costs have also stifled investment growth, which could put the Philippines behind its neighbors with more conducive business environments and investment climates.
FDI inflows in April dropped to $250 million, a 58.8% year-on-year plunge from $607 million, marking the lowest monthly FDI inflows in nearly 10 years.
The slump in FDI inflows came amid heightened uncertainty over the Middle East war, although some analysts attribute this to lower intercompany borrowings.
FDI net inflows in the first four months of the year reached $1.968 billion, 26.5% lower than $2.675 billion in the same period last year.
The slowdown in FDI growth could dent economic growth momentum as fewer investments weaken aggregate demand and undermine the country's productive capacity.
Analysts say the government should implement reforms to resolve its governance issues and enhance ease of doing business to regain lost investor confidence.
Strengthening policy consistency, improving ease of doing business, and accelerating infrastructure development are key steps the government can take to convert investor interest into actual investments.
The country's elevation to an upper-middle income country and good standing in the Institute of International Finance's investor relations ranking may also help attract more investments.
However, for this to take off in the medium to long term, the country will have to conduct structural reforms to address governance issues and its inherent vulnerability to external shocks.
The central bank has projected FDI net inflows to reach $7 billion this year, lower than the estimated $7.8 billion in 2025, but expects a gradual and uneven recovery by next year.
