FDI inflows shrink 18.3% to $2.997 B in first half – BSP

Published September 16, 2020, 6:00 AM

by Lee C. Chipongian

The central bank yesterday said for the first half of 2020 the country’s net foreign direct investments (FDI) inflows fell by 18.3 percent to $2.997 billion from $3.670 billion same period last year because of the COVID-19 pandemic.

 FDIs are equity capital, reinvestment of earnings, and borrowings as registered by the Bangko Sentral ng Pilipinas (BSP). For this year, the BSP is projecting total net FDI of $4.1 billion. This was a revised forecast from its pre-pandemic projection of $8.8 billion.

 Despite the declining net FDI on a cumulative basis, the BSP said that on the positive side, the contraction of 18.3 percent January to June is an improvement compared to the 21.9 percent decline recorded for the January to May period.

 For the month of June only, the FDI net inflows went up by 7.1 percent to $481 million versus $449 million same time in 2019. According to the BSP: “This positive development was underpinned by the gradual reopening of advanced economies with investment interest in the Philippines, and the country’s sustained strong macroeconomic fundamentals, despite the COVID-19 pandemic.”

 In June, net equity capital investments increased by 491.3 percent to $173 million from just $29 million last year after a 137.6 percent growth in equity capital placement of $185 million from $78 million. The decline in withdrawals of 74.9 percent to $12 million from $49 million also contributed to the increase in net equity capital investments.

 “The bulk of the equity capital placements for the month originated from Japan, the United Kingdom and the US,” noted the BSP. “By economic activity, these placements were invested mainly in manufacturing, human health and social work, financial and insurance, and real estate industries.”

 Also in June, the net investments in debt instruments decreased to $229 million or 28.8 percent lower from the same period last year of $321 million. Reinvestment of earnings dropped by 19.4 percent to $80 million from $99 million.

For the first six months, the central bank noted that equity capital placements were sourced primarily from Japan, the Netherlands, Singapore and the US, and invested in these sectors: manufacturing, real estate, financial and insurance and administrative and support service industries.

During the period, net investments in equity capital registered a growth of 146.8 percent to $910 million from $369 million, better than the 117.1 percent cumulative growth reported end-May.

The end-June net investments in debt instruments decreased by 39.8 percent year-on-year to $1.654 billion from $2.747 billion. Reinvestment of earnings also fell by 21.7 percent to $433 million from $553 million.

 “Net investments in debt instruments and reinvestment of earnings posted lower declines of 39.8 percent from -41.3 percent by May … and 21.7 percent from -22.2 percent by May,” said the BSP

The BSP added that the “favorable performance in net investments in equity capital was attributed to the combined effects of an expansion in equity placements of 16.6 percent to $1 billion (from $881 million), and a contraction in withdrawals of 77.1 percent to $117 million (from $512 million).