FDI net inflows slipped to five-month low in June — BSP data

Investment inflows for the month of June fell to a five-month low in June on the back of lower net investments in equity capital and reinvestment of earnings during the period, data released by the Bangko Sentral ng Pilipinas (BSP) on Monday showed.

Foreign direct investment (FDI) net inflows for June stood at $484 million, down from $487 million in May and 3.9% lower than the $503 million in June 2022. It is also the lowest in five months since the $465 million in January.

“This was due to the recorded declines in non-residents’ net investments in equity capital (other than reinvestments of earnings) and their reinvestment of earnings,” the BSP said in an accompanying statement.

Net investments in equity capital for the month were recorded at $111 million, down from $235 million the previous month, and $126 million the previous year. Reinvestment of earnings also fell to $89 million from $91 million in May and $122 million in June 2022.

Bulk of the equity capital placements for the month came from Japan, the United States, and Singapore, which were then channeled into manufacturing, real estate, and the information and communication industries.

Meanwhile, net investments in debt instruments jumped to $283 million from $161 million the previous month, and $255 million the same month last year.

The latest figures brought the first-half FDI net inflows to $3.9 billion, 20.4% lower than the $4.9 billion recorded in the comparable period of 2022.

“The slowdown in FDI may be due largely to investor concerns over weak growth prospects amid persistent global uncertainties,” the BSP said.

In a separate commentary, Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort attributed the slowdown to higher prices, as inflation clocked in at 5.4% in June, still above the government’s target range of 2.0% to 4.0%.

“FDIs may have been weighed by higher prices/inflation and higher interest rates (after the aggressive policy rate hikes in the US/globally and locally in an effort to bring down inflation) that increased borrowing costs/financing costs, all of which made investments more expensive locally and globally, thereby reducing investments/FDIs in recent months,” he said.

Ricafort noted, however, that FDIs remain “one of the bright spots and one of the major pillars” of the local economic recovery program from COVID-19, as he said macroeconomic numbers have shown growth from the pandemic.

“The missing pieces of the recovery story, tourism and face-to-face/in-person schooling are on the right track to bring along related/allied businesses/industries towards a greater recovery path and could help attract more foreign investments/FDIs, going forward,” he said.

The Monetary Board of the BSP in June decided to keep policy rates unchanged, as it lowered its inflation outlook for the year to 5.4% from the 5.5% it projected during its meeting in May.

Prior to this, it hiked key policy rates by 425 basis points since May 2022, with the latest being a 25-basis point increase to bring the benchmark rate to 6.25%.

In December last year, Malacañang said Marcos’ foreign visits in 2022 alone have generated $23.6-billion in investment pledges. He has since visited more countries including the United States where $1.3-billion worth of pledges were reportedly secured. — RSJ, GMA Integrated News