‘Corruption scandal clouds FDI outlook’

But weak peso seen easing trade pressures

MANILA, Philippines — Foreign direct investment (FDI) prospects are expected to soften further into 2026 as the corruption scandal involving flood-control projects continues to weigh on investor sentiment, according to BMI Country Risk & Industry Research.

In a report, BMI said FDI inflows have been losing momentum, falling to 1.3 percent of gross domestic product in the second quarter of 2025, well below the 2.5 percent pre-pandemic average.

The drop steepened in August, with inflows slumping by 40.5 percent to $494 million from $830 million a year ago, data from the Bangko Sentral ng Pilipinas (BSP) showed. Projections also point to continued deterioration as confidence remains fragile.

BMI said the alleged graft in infrastructure projects intensified investor unease, contributing to a faster pullback in commitments and capital placements.

“The corruption scandal will dampen foreign direct investment inflows into 2026, adding to pressures from macroeconomic uncertainty and global trade tensions,” BMI said.

At the same time, the scandal has added pressure on the peso. The currency is down by 1.7 percent year-to-date, with BMI expecting further weakness as the BSP is expected to cut policy rates by 25 basis points in December following slower third-quarter growth.

“We forecast the peso at around 59 per dollar by end-2025 and 59.5 per dollar by end-2026, with the weaker peso currently providing modest support to the trade balance in 2026,” it said.

Still, the weaker currency is providing modest relief to the trade balance and helping limit deterioration in the external accounts.

The current account deficit is expected to narrow only slightly to 3.2 percent in 2026 from 3.4 percent of GDP in 2025, remaining wider than the 0.4 percent average deficit recorded between 2015 and 2019.

Seasonally adjusted data showed the deficit near 3.1 percent of GDP in the first half of 2025, supported by resilient merchandise exports, which posted 13.1 percent year-on-year growth in the first three quarters of the year.

BMI said the risks to the outlook are balanced. Unpredictable shifts in US trade policy could widen the current account deficit, while progress in bilateral negotiations to reduce the reciprocal tariff could help offset external pressures.