By Isa Jane D. Acabal, Researcher
FOREIGN INVESTMENT Pledges in the Philippines increased by 52.3%. first quarter from low base a year earlier, although committedthe conditions dropped to a very low level in four hours as mentioned by analysts geopolitical uncertainty, raised costs, and weak household growth such as risks to investor sentiment.
Preliminary data from the Philippine Statistics Authority (PSA) showed external commitments approved by the country’s investment promotion agencies (IPAs) reached P42.64 billion during the January to March period, higher than the revised P27.99 billion posted for the same quarter in 2025.
However, this was the lowest level in four quarters, or from the P27.99 billion recorded in the first quarter of 2025. It was also lower than the P105.66 billion in foreign investment pledges approved in the fourth quarter last year.
Ateneo Center for Economic Research and Development Senior Research Fellow Ser Percival K. Peña-Reyes pointed out that the increase in foreign investment pledges is due to “the return of a low base in 2025, strong investor interest in key industries…, and improved investment momentum and export prospects despite global uncertainty.”
At the same time, Cid L. Terosa, an associate professor at the University of Asia and the Pacific, said the strong growth in foreign investment pledges reflects “improved investor sentiment.”
He added that the development of new technologies and future-proof economic areas are in line with the administration’s campaign to renew renewable energy, manufacturing, IT business process management (IT-BPM) and transportation industries, as well as facilitating the entry of investment through changes such as Business Recovery and Business Tax Incentives to Increase Legal Opportunities or Increase CRE Opportunities.
Ruben Carlo O. Asuncion, an economist at the Union Bank of the Philippines, said that despite the sharp year-on-year growth, approved foreign investment remains low, reflecting investor caution.
“The quarter was characterized by a few large, capital-intensive projects, with many firms choosing to delay or phase out investment amid global uncertainty. In addition, domestic investment momentum has softened, which may have weighed on overall approvals during this period,” he said in an email.
GEOPOLITICAL RISKS
Analysts say it is a progressive Middle The eastern conflict weighed on the invesmood during the quarter and prompted investors to take a more cautious stance.
“Although permitted foreign investment is increasing year by year, the conflict created economic uncertainty that weighed on the minds of investors in several sectors,” said Mr. Peña-Reyes in a Viber message.
To Mr. Asuncion, the conflict has increased project costs and risk costs, leading investors to take a wait-and-see approach.
“This was most evident towards the end of the quarter, when firms began to reassess schedules and costs due to rising fuel prices and geographic risks,” he said.
Mr. Asuncion said the Philippine economy’s slowdown in the first half also weakened near-term investor confidence, “especially in projects closely related to domestic demand.”
The Philippine economy grew by 2.8% in the first quarter of 2026, slower than the 5.4% increase last year and the 3% growth in the fourth quarter of 2025.
Mr. Peña-Reyes said the slow growth of the domestic product (GDP) “is a sign that businesses and consumers are more cautious about spending and investing.”
“Investors are concerned about delays in government spending and infrastructure projects, ongoing effects of corruption scandals, rising inflation and oil prices caused by Middle East tensions, and weak domestic demand,” he said.
“Weak confidence has also affected business expansion plans, consumer spending and stock market sentiment, as investors have become more risk averse amid uncertainty about inflation, government policy delays and country shocks,” he added.
In the three months to March, investment commitments have been approved by seven of the 15 IPAs – the Bases Conversion and Development Authority (BCDA), the Investment Board, Clark Development Corp. (CDC), Cagayan Economic Zone Authority, Clark International Airport Corp., Philippine Economic Zone Authority (PEZA), and Subic Bay Metropolitan Authority.
PEZA approved foreign pledges worth P19.96 billion, accounting for 46.8% of the total. This was followed by CDC, which approved bonds worth P9.27 billion (21.7% shares), and BCDA for P6.2 billion (14.5% shares).
South Korea accounted for the largest amount, or 59.5%, of the total approved foreign investment amounting to P25.37 billion.
Singapore followed with P3.18 billion in commitments or 7.5% of the total, while China had P2.54 billion or 5.9%.
In the first quarter, the Bataan Freeport Area Authority, Bangsamoro Economic Zone Authority, Bangsamoro Board of Investments, John Hay Management Corp., PHIVIDEC Industrial Authority, Poro Point Management Corp., Tourism Infrastructure and Enterprise Zone Authority, and Zamboanga City Special Economic Zone Authority did not report any approved foreign investment pledges during the foreign investment period.
About 24.4% or P10.38 billion of approved foreign investment was allocated to the arts, entertainment and recreation industry, while 21.3% or P9.08 billion was targeted.
Lodging and catering operations accounted for P9.07 billion of commitments, equivalent to 21.3% of total pledges during the period.
Regionally, Central Luzon received the highest share of approved foreign investment pledges, accounting for 77.6% or P33.08 billion. Calabarzon followed with P3 billion (7% share) and the National Capital Region with P2.13 billion (5% share).
Approved projects with foreign interest are expected to generate 13,108 jobs, down 32.1% from the 19,318 jobs expected last year.
In the first quarter, the combined investment commitments from foreign and Filipino investors decreased by 30.8% to P125.95 billion from P181.97 billion in the same period in 2025.
The decline in authorized investment indicated that the increase in foreign pledges was insufficient to meet fragile domestic investment commitments.
Investment pledges by Filipinos reached P83.31 billion in the first three months of 2026, accounting for 66.1% of total approved commitments.
“Looking ahead, foreign investment pledges may not be balanced in the second quarter, as global investors continue to be concerned about geopolitical risks and high energy costs,” said Mr. Asuncion.
In the full year of 2026, he expects a gradual improvement in foreign investment commitments, although still below the high levels.
“Solid prospects depend on a reduction in external tensions, clear signs of global policy, and a stabilization of domestic growth momentum in the second half of the year,” he said.
On the other hand, Mr. Peña-Reyes said he expects “a positive situation that is limited but moderate rather than explosive.”driven” foreign investment perspective move forward.
“The winners in the sectors are likely to be manufacturing, digital infrastructure, logistics, mineral processing and export-oriented ecozone projects. The biggest downside risks are the global economic slowdown, political tensions, weak FDI (foreign direct investment) and weak renewable energy investment activity,” he said.
Meanwhile, Mr. Terosa said the slow economic growth in the first three months of 2026 will continue to affect investor confidence in the coming quarters.
“In particular, I expect foreign investment pledges to grow peacefully as long as the conflicts in the Middle East continue to disrupt the plans of investors and strengthen business plans. If the termination of the conflict in the Middle East remains impossible, the growth of investment pledges and approvals in 2026 will be maintained,” he said.
PSA data on foreign investment commitments is different from foreign direct investment tracked by the Bangko Sentral ng Pilipinas. The central bank’s supervision goes beyond approved projects and includes reinvested profits and lending to Philippine units through debt instruments.
