Investors optimistic despite 2025 setbacks

MANILA, Philippines — Investment promotion agencies are looking ahead to 2026 with optimism, citing a strong pipeline of investment pledges for evaluation, even as they report a mixed outlook on investment approvals for this year, amid global and domestic headwinds that are affecting investor sentiment.

The year 2025 was marked by uncertainties, including the US’ protectionist policies and higher tariffs on its trade partners, including the Philippines, which led investors to take a cautious approach in making investment commitments.

On the domestic front, a flood control controversy involving allegations of public officials receiving kickbacks, collusion among contractors and ghost and substandard projects has weighed on investor sentiment.

These challenges were reflected in project commitments approved by investment promotion agencies.

In particular, investment pledges approved by the Board of Investments (BOI) as of mid-December reached P843.24 billion, short of the P1.75 trillion target for the year.

From January to November, investments approved by the BOI declined by 48 percent to P816.81 billion from P1.58 trillion in the same period last year.

Trade Secretary and BOI chair Cristina Roque said that while there are P1 trillion worth of projects in the pipeline for evaluation that can increase the approvals for the current year, the agency is unsure if these can be processed and cleared within the year.

Trade Undersecretary and BOI managing head Ceferino Rodolfo said it is unclear whether the investments can be evaluated this year due to the endorsements and certifications required from other government agencies.

The pipeline includes three hydroelectric projects, four offshore wind projects, two air transport service projects and one transport infrastructure project.

While the BOI is uncertain about meeting the investment approvals target for the year, the project pipeline is providing the agency with an optimistic outlook for 2026.

Despite governance issues related to infrastructure projects, Rodolfo said investment inquiries have not slowed down.

However, he said some prospective investors have been asking about the flood control controversy and actions being taken by the government.

“The pipeline is still there…You just have an extra step where you explain what you’re doing,” he said, citing the government’s efforts to prosecute those involved, recover assets and put in place reforms.

As investments being registered with the agency have a long gestation period, he said these investors are placing greater importance on the country’s economic fundamentals including growth and domestic demand.

To take advantage of the Enhanced Mining Fiscal Regime Act approved earlier this year, he said the BOI would actively be promoting mining and mineral processing to investors next year.

For his part, Philippine Economic Zone Authority (PEZA) director general Tereso Panga said the agency is confident of meeting and even surpassing the agency’s P250-billion investment approvals target for the year.

“Following our board meeting scheduled on Dec. 22, we expect additional projects to be approved that will push total commitments beyond this level,” he said, noting that the agency has a strong pipeline of investments.

The PEZA has approved 281 new and expansion projects with investments amounting to P207.58 billion from January to November, a three percent increase from the P201.55 billion in investments approved during the same period last year.

Panga said investment approvals reached around P238 billion from January to Dec. 12, just P12 billion short of the agency’s P250-billion target, although data on additional projects has yet to be released.

However, investment pledges approved by the PEZA in November alone dropped by 59 percent to P32.21 billion from the previous year’s P77.79 billion.

“Looking ahead, we expect investment approvals to increase further next year,” Panga said.

He said more firms are recognizing the advantages of the government’s reform agenda, particularly the improved fiscal incentive regime under the CREATE MORE Act, as well as other initiatives at the Department of Finance and the Bureau of Internal Revenue aimed at strengthening good governance, transparency and predictability in the business environment.

Aside from reforms already in place, he said the PEZA is closely monitoring the normalization of the US tariff environment, which is expected to improve global trade conditions and support the reconfiguration of supply chains.

“This, in turn, continues to position the Philippines — and PEZA ecozones in particular — as an attractive and stable destination for export-oriented and high-value investments,” he said.

While investment promotion agencies are hopeful for next year, business groups emphasized the need to address governance and reputational challenges.

Management Association of the Philippines president Alfredo Panlilio said there has been a lot of talk about the need for greater transparency and accountability amid the flood control controversy and the business sector is waiting for the results of actions being taken by the government.

He said the Philippines’ chairmanship of the Association of Southeast Asian Nations in 2026 provides an opportunity for the country to address both governance and reputational issues.

“It’s a time to showcase the Philippines, show them what we’re trying to do to address the issues that we have in front of us. At the end of the day, I think we need to regain our credibility. A lot of it is reputational, so I think we need to recover that,” he said.

For the European Chamber of Commerce of the Philippines (ECCP), the country’s current investment landscape is mixed, but remains investable.

“While BOI data show a significant year-to-date decline in approved investments, the continued resilience of PEZA ecozone approvals highlights that investor interest remains, though it has become more selective and risk-aware,” the group said.

Even as companies increasingly prioritize policy clarity, project bankability and execution efficiency before committing capital, the group said its 2025 Business Sentiment Survey Report showed that most firms still expect their trade and investment activity to increase.

“Investor sentiment remains cautiously optimistic. Many firms are pursuing opportunities in sectors with solid economic and demand fundamentals, such as energy, export manufacturing, IT-BPM (Information technology - business process management), logistics and ecozone development. Others are pacing their expansion amid evolving global and domestic conditions,” the group said.

As recent issues surrounding anomalous flood control projects have influenced investors’ risk assessment, the ECCP recommends rebuilding trust through greater transparency and accountability to strengthen investor confidence.

The ECCP also urged the government to ensure predictability and reduce friction in doing business by streamlining permit and approval processes.

Moreover, the ECCP recommends lowering structural costs and execution risks to make the Philippines more competitive against regional peers.

While economists expect investment approvals to improve in 2026 compared to this year, they stressed the importance of reforms.

Moody’s Analytics assistant director and economist Sarah Tan said that the drop in approved investment pledges reflects global headwinds this year such as the unpredictability of US trade policy and higher tariffs and domestic factors, including recent corruption-related controversies.

While some projects may still be approved in December due to year-end processing, she said the uncertainties make it unlikely that the final month will materially reverse the decline.

“Looking ahead to next year, the outlook is cautiously more positive as rate cuts gradually flow into the real economy, which will help lower borrowing costs and support investment appetite,” she said.

At its last policy meeting for 2025, the Monetary Board trimmed the benchmark interest rate by 25 basis points to 4.50 percent.

The latest move brought the total rate cuts to 200 basis points since the central bank’s easing cycle started in August 2024.

To regain momentum in investment pledges and restore investor confidence, Tan said consistent policies, faster and more predictable approvals and clear steps to strengthen transparency and governance are needed.

For Pantheon Macroeconomics chief emerging Asia economist Miguel Chanco, 2026 is expected to be a bit better in terms of growth in investment pledges due to this year’s low base.

“The outlook would certainly brighten if the anti-corruption drive at home not only holds those who are accountable for misdoings, but also leads to real reforms that prevent this problem from arising again to such a degree over the long run,” he said.