By Lee C. Chipongian
The central bank reported that as of end-May, net foreign direct investments (FDI) registrations declined by 37.1 percent year-on-year to $3.14 billion from $5 billion same time last year.
For the month of May only, the Bangko Sentral ng Pilipinas (BSP) said net inflows totaled $242 million, also lower by 85.1 percent from $1.62 billion in May of 2018.
In a statement, the BSP said the lower month of May net FDI was because of a drop in net investments in debt instruments of 88.6 percent year-on-year to $149 million from $1.3 billion.
“(This is) due mainly to higher prepayments and repayments of debt owed by resident enterprises to their foreign affiliates, coupled with the decline in their borrowings from their foreign affiliates,” said the BSP which also noted that the mere $1-million net inflows of equity capital compared to $241 million in 2018 also contributed to the decline in FDI during the period.
FDl, as monitored by the BSP, covers actual investment inflows as equity capital, reinvestment of earnings, and borrowings between affiliates.
For the January to May tally, net FDI was down by 37.1 percent because of a 48.9 percent decline in net equity capital investments to $787 million compared to same time last year of $1.5 billion. In the meantime, the BSP said withdrawals increased to $451 million from $139 million while net investments in debt instruments decreased to $2.4 billion from $3.2 billion.
For the month of May, the BSP said a big portion of equity capital placements came from investors in the US, Japan, Singapore, China, and Hong Kong. “These capital infusions were invested largely in the real estate, manufacturing, financial and insurance, construction and human health and social work industries,” said the BSP. Reinvestment of earnings went up by 15.9 percent to $92 million in May.
For the period January to May, equity capital placements mostly came from investors based in Japan, the US, China, Singapore, and South Korea. The biggest of these placements were in the financial and insurance, followed by real estate, manufacturing, transportation and storage, and administrative and support service industries.
As of end-May, reinvestment of earnings totaled $418 million, up 12.9 percent from $371 million last year. For this year, the BSP is projecting a total net FDI of $9 billion, which was lower than its original projection of $10.2 billion.
When the BSP downgraded its external accounts projection last June, it said that factors for the decision included the slower global growth outlook, the near-term moderation in global trade outlook and the expected decline in commodities. The trade tensions between the US and China, the US Federal Reserve’s dovish monetary policy stance, uncertainties over Brexit and the expected modest rebound in non-resident capital flows to emerging markets were also considered in external sector projections.