FDI soars 43.8% to $7.3B in Jan.-Sept., surpasses BSP's full-year target

Despite the lingering concerns on the COVID-19 pandemic, foreign direct investment (FDI) yielded net inflows for the first nine months of the year, surpassing the central bank’s target for the entire 2021, data released by the Bangko Sentral ng Pilipinas (BSP) showed Friday.

The central bank defines FDI as an investment by a non-resident or foreign direct investor in a resident enterprise or an investment made by a non-resident subsidiary or associate in its resident direct investor.

FDI can be in the form of equity capital, reinvestment of earnings, and borrowings.

Central bank figures showed the FDI net inflows for the January to September period stood at $7.3 billion, up 43.8% from the $5.1 billion worth of net inflows posted in the same period in 2020.

The year-to-date FDI net inflows has exceeded the BSP’s target of $7 billion worth of net inflows for the entire year.

In a Viber group message, BSP Governor Benjamin Diokno told reporters that the central bank is revising its full-year FDI net inflows target.

“The revised number will be announced next week, if not sooner,” he said.

The higher January to September net FDI inflows was mainly on account of the 78.6% increase in non-residents’ net investments in debt instruments to $5.3 billion from $3 billion last year, according to the BSP.

Net investments in debt instruments consist mainly of inter-company borrowing or lending between foreign direct investors and their subsidiaries in the Philippines.

Meanwhile, reinvestment of earnings reached $865 million, up by 12.3% from the $770 million year-on-year.

Foreigners’ net investments in equity capital - other than reinvestment of earnings - declined by 15.7% to $1.1 billion from $1.3 billion in January to September 2020 period.

“Net investments in equity capital declined as placements contracted by 8.1% to $1.5 billion (from $1.6 billion) and withdrawals rose by 30.7% to $337 million (from $258 million),” the BSP said.

The central bank noted that bulk of the equity capital placements originated from Singapore, Japan, the United States, and the Netherlands.

“These were invested mostly in the manufacturing; financial and insurance; electricity, gas, steam, and air-conditioning; and real estate industries,” it said.

Sought for comment, Rizal Commercial Banking Corp. chief economist Michael Ricafort said that accelerated vaccination versus the COVID-19 in the country towards population protection and eventually herd immunity that led to the significant reduction in new COVID-19 local cases to 17-month lows since July 2020 helped justify further re-opening of the economy towards greater normalcy and helped attract more foreign investments into the country.

Ricafort added that the CREATE law, which reduced corporate income tax rates by at least -5 percentage points, also attracted more FDIs into the country.

“Near record-low interest rates would also encourage more investments/FDIs, which create more jobs and other economic/business activities in the country, as one of the bright spots and major pillars of the economic recovery program from COVID-19,” the economist said.

In September alone, FDI net inflows recorded a 30.4% growth to $660 million from the $506 million net inflows in the same month in 2020.

“FDI net inflows in September 2021 rose on the back of the 60.2% increase in non-residents’ net investments in debt instruments to $538 million from $336 million in the same month last year. Likewise, reinvestment of earnings grew by 25.2% to $89 million from $71 million,” the central bank said.

However, non-residents’ net investments in equity capital declined by 67.4% to $32 million from $99 million in September 2020.

“This was due to the decrease in equity capital placements (by 22.3% to $88 million from $114 million), coupled with the expansion in equity capital withdrawals (by 269.8% to $56 million from $15 million),” the BSP said.

The central bank said equity capital placements during the month came largely from Japan, the United States, Hong Kong, Indonesia, and Singapore and were channeled mainly to the manufacturing; real estate; professional, scientific and technical; and construction industries.—AOL, GMA News