‘Philippines falls behind in race for foreign investments’

MANILA, Philippines — Global investors are increasingly overlooking the Philippines as weak economic growth and political noise erode the country’s appeal, even as corporate earnings remain resilient and stock valuations become cheaper, according to BDO Capital and Investment Corp.

“Foreign investors are not really looking at the Philippines anymore. We’re so small. We’re really negligible as part of the overall index,” BDO Capital president Eduardo Francisco said in an interview with Money Talks.

Francisco said Philippine companies continued to perform well, with many surpassing their earnings guidance. However, the Philippines’ relatively small weight in global investment benchmarks has made it easier for foreign fund managers to reduce their exposure or direct capital elsewhere.

“From an income perspective, these companies are surpassing guidance. They’re doing extremely well,” he said. “But then because, from a foreign portfolio manager’s perspective, the Philippines is not that important to them anymore, and therefore they’re putting less funds in.”

Registered foreign investments posted a net inflow of $66.47 million in July, marking the third consecutive month that more portfolio capital entered than left the country.

These investments, sometimes called hot money because they can move quickly in and out of financial markets, are placed mainly in listed stocks, government securities and other peso-denominated assets.

Despite the recent monthly inflows, the January to July period still recorded a net outflow of $3.94 billion, reversing the $2.25-billion net inflow in the same period last year. Gross inflows reached $15.61 billion, but these were outweighed by $19.55 billion in withdrawals.

Francisco said the Philippines is competing for capital not only with other Southeast Asian economies but also with investment destinations worldwide.

He noted that the Philippines previously marketed itself as one of Southeast Asia’s fastest-growing economies alongside Vietnam. That advantage has weakened following the sharp slowdown in domestic growth.

The economy grew by only 2.3 percent in the second quarter. This was slower than the 2.8-percent expansion in the first quarter and brought first half growth to 2.6 percent.

Francisco said the weak figures could undermine the country’s long-standing investment narrative of consumption-led resilience as households become increasingly cautious about spending.

He said multinational companies were already seeing consumers shift from full-sized products to smaller sachets and, more recently, from their preferred brands to cheaper alternatives.

Francisco also warned that political controversies were further dampening sentiment.

“All this political noise is not helping us because instead of wanting to invest here, it’s giving them an excuse to stay out,” he said.

The concerns extend beyond portfolio investments, which generally flow into tradable stocks and bonds, to foreign direct investment (FDI), which represents longer-term capital placed by foreign investors seeking a lasting stake in Philippine businesses.

In a separate analysis, Geronimo Law founder and managing lawyer Russell Stanley Geronimo said sweeping economic liberalization measures had failed to translate into stronger FDI because high operating costs, policy uncertainty and governance concerns remained unresolved.

Preliminary BSP data showed that net FDI dropped by 33.4 percent to $2.18 billion from January to May compared with $3.27 billion in the same period in 2025.

In May alone, inflows plunged by 64.7 percent to $210 million from $595 million a year earlier. Geronimo said this was the lowest monthly reading since March 2015.

Geronimo said the downturn came despite the country’s extensive investment reforms over the past four years. He said policymakers had mistaken legal liberalization for investor confidence.

“Liberalization removed the legal barriers but left the cost of doing business untouched,” he said.

Foreign companies still face high electricity prices, congested ports, elevated logistics costs and shortages of skilled workers, according to Geronimo.

“Vietnam, with a less liberal statute book, offers cheaper power, better logistics and a credible pipeline of trade agreements. Investors went where operating costs are lower, not where ownership rules are friendlier,” he said.

He called for constitutional and judicial reforms, lower operating costs and the ratification of trade and investment agreements that would provide foreign investors with stronger legal protection.

“Governments offer incentives when they cannot offer credibility,” Geronimo said. “It should now invest in credibility, which costs more and takes longer, but is what investors have been looking for all along.”