By Isa Jane D. Acabal, Researcher
FOREIGN INVESTMENT pledges in the Philippines rose by 52.3% in the first quarter from a low base a year earlier, although commitments fell to their lowest level in four quarters as analysts cited geopolitical uncertainty, elevated costs, and weaker domestic growth as risks to investor sentiment.
Preliminary data from the Philippine Statistics Authority (PSA) showed foreign commitments approved by the country’s investment promotion agencies (IPAs) reached P42.64 billion in the January-to-March period, higher than the revised P27.99 billion logged in the same quarter in 2025.
However, this was the lowest level in four quarters, or since the P27.99 billion recorded in the first quarter of 2025. It was also lower than the P105.66 billion 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 attributed the increase in approved foreign investment pledges to “a rebound from a low base in 2025, stronger investor interest in key industries…, and improved investment momentum and export prospects despite global uncertainties.”
On the same note, Cid L. Terosa, an associate professor at the University of Asia and the Pacific, said the sharp growth in foreign investment pledges reflected “improved investor sentiment.”
He added that developments in new technology and future-ready economic zones align with the administration’s drive to revitalize the renewable energy, manufacturing, IT-business process management (IT-BPM) and logistics industries, and to streamline investment inflows through reforms such as the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy or CREATE MORE law.
Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, said that despite the sharp year-on-year growth, approved foreign investments remained relatively low, reflecting cautious investor sentiment.
“The quarter was characterized by fewer large-scale, capital-intensive projects, with many firms opting to delay or phase investments amid global uncertainty. In addition, domestic investment momentum has softened, which likely weighed on overall approvals during the period,” he said in an e-mail.
GEOPOLITICAL RISKS
Analysts said the ongoing Middle East conflict weighed on investor sentiment during the quarter and prompted investors to adopt a more cautious stance.
“While total approved foreign investments rose sharply year on year, the conflict created economic uncertainty that weighed on investor sentiment in several sectors,” Mr. Peña-Reyes said in a Viber message.
For Mr. Asuncion, the conflict increased project costs and risk premiums, leading investors to take a wait-and-see approach.
“This was most evident toward the latter part of the quarter, when firms began reassessing timelines and costs in light of rising fuel prices and geopolitical risks,” he said.
Mr. Asuncion said the subdued Philippine economy in the first quarter also weakened near-term investor confidence, “particularly for projects that are closely tied to domestic demand.”
The Philippine economy expanded by 2.8% in the first quarter of 2026, slower than the 5.4% expansion a year earlier and the 3% growth in the fourth quarter of 2025.
Mr. Peña-Reyes said slower gross domestic product (GDP) growth “signals that businesses and consumers are becoming more cautious about spending and investing.”
“Investors are worried about delayed government spending and infrastructure projects, the lingering effects of corruption controversies, rising inflation and oil prices caused by Middle East tensions, and weaker domestic demand,” he said.
“The weakened confidence has also affected business expansion plans, consumer spending and stock market sentiment, as investors have become more risk-averse amid uncertainty over inflation, government policy delays and external geopolitical shocks,” he added.
In the three months to March, investment commitments were approved by seven out of 15 IPAs — Bases Conversion and Development Authority (BCDA), Board of Investments, 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 P9.27 billion worth of commitments (21.7% share), and BCDA with P6.2 billion (14.5% share).
South Korea accounted for the bulk, or 59.5%, of total approved foreign investment pledges worth P25.37 billion.
Singapore followed with P3.18 billion in commitments or 7.5% of the total, while China accounted for P2.54 billion or 5.9%.
In the first quarter, the Authority of the Freeport Area of Bataan, 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 period.
About 24.4% or P10.38 billion of the approved foreign investments were allocated to the arts, entertainment and recreation industry, while 21.3% or P9.08 billion were intended for manufacturing.
Accommodation and food service activities accounted for P9.07 billion worth of commitments, equivalent to 21.3% of total pledges during the period.
By region, Central Luzon received the highest share of total 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 projected jobs a year earlier.
In the first quarter, combined investment commitments from both foreign and Filipino investors fell by 30.8% to P125.95 billion from P181.97 billion in the same period in 2025.
The decline in overall approved investments indicated that the rise in foreign pledges was not enough to offset weaker 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 remain uneven in the second quarter, as global investors continue to navigate geopolitical risks and elevated energy costs,” Mr. Asuncion said.
For full-year 2026, he expects gradual improvement in foreign investment commitments, although still below peak levels.
“Stronger prospects hinge on easing external tensions, clearer global policy signals, and a recovery in domestic growth momentum in the second half of the year,” he said.
For his part, Mr. Peña-Reyes said he expects a “moderately positive but normalization-driven rather than boom-driven” outlook for foreign investments moving forward.
“Sectoral winners are probably manufacturing, digital infrastructure, logistics, mineral processing and export-oriented ecozone projects. The main downside risks are global slowdown, geopolitical tensions, weaker FDI (foreign direct investment) appetite, and softer renewable energy investment activity,” he said.
Meanwhile, Mr. Terosa said the slower economic growth in the first three months of 2026 will likely continue to influence investor confidence in the coming quarters.
“In particular, I expect foreign investment pledges to grow mutedly as long as the Middle East conflict continues to muddle investor plans and rein in business initiatives. If the cessation of the Middle East conflict remains elusive, the growth of investment pledges and approvals in 2026 will be kept at bay,” he said.
The PSA data on foreign investment commitments differ from actual foreign direct investments tracked by the Bangko Sentral ng Pilipinas. The central bank’s monitoring goes beyond approved projects and includes reinvested earnings and lending to Philippine units through debt instruments.
