FDI net inflows down to 20-month low in January

Foreign direct investments (FDIs) into the Philippines fell to a 20-month low in January as there were fewer inflows in debt instruments and equity capital during the month, the Bangko Sentral ng Pilipinas (BSP) reported Tuesday.

Data released by the central bank showed that FDI net inflows stood at $448 million in January, 45.7% lower than the $824 million the same month last year, and lower than the $634 million in December 2022.

The latest figure is the lowest in 20 months since the country reported a $426 million net inflow in May 2021.

“This result is from the decrease in non-residents’ net investments in debt instruments and equity capital,” the BSP said in an accompanying statement.

“FDI net inflows declined during the month amid global economic uncertainties and high inflation, which continued to weigh on investor decisions,” it added.

Headline inflation clocked in at 8.7% in January, the highest in over two decades since November 2008’s 9.1%.

It has since decelerated to 7.6% in March, slower than the 8.6% recorded in February. Core inflation, which excludes select food and energy items, however, climbed to 8% - the highest since March 1999’s 8.1%.

Inflows of non-residents in net debt instruments stood at $280 million, lower than the $286 million in December and 56.6% lower than the $645 million in January 2022.

Meanwhile, net equity other than reinvestment of earnings was recorded at $93 million, down from $268 million in December and 13.1% lower than the $107 million in January 2022.

Reinvestment of earnings was recorded at $75 million, translating to a 4.1% increase from $72 million in January 2022, but lower than the $80 million in the previous month.

Most of the equity capital placements for the month came from Japan, Singapore, and the United States, and were channeled mainly into manufacturing, financial and insurance, and real estate industries.

According to Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael Ricafort, FDIs could still see an upward movement given the easing of restrictions implemented to combat the spread of COVID-19.

“For the coming months, net FDIs could pick up as the economy reopened towards greater normalcy,” he said in a separate commentary.

Ricafort also noted that among the possible drivers are the Philippine economic growth, the country’s demographics, the economic reopening of China, and the investment commitments from foreign trips of the current administration.

Among the latest trips taken by President Ferdinand “Bongbong” Marcos Jr. was to Japan in February, where 35 investment deals were said to have been inked, covering infrastructure, energy, manufacturing, and healthcare.

“Investment commitments, especially if realized/monetized, from the various foreign trips by the new administration could also help generate more investments (FDIs), jobs/employment, infrastructure spending/projects, trade, foreign tourism, and business/economic opportunities that add to the overall economic/GDP growth and development,” Ricafort said. — DVM, GMA Integrated News