FDI net inflows down 10.9% in first 7 months

Published October 13, 2020, 6:00 AM

by Lee C. Chipongian

Foreign direct investment (FDI) net inflows registered by the Bangko Sentral ng Pilipinas (BSP) for the first seven months amounted to $3.795 billion, 10.9 percent lower compared to same time last year of $4.259 billion. 

For the month of July alone, net inflows rose by 35.2 percent year-on-year to $797 million from $590 million. This is the third month that net FDI on a monthly basis is reporting an increase.

 “The FDI net inflows rose for the third consecutive month on the back of investors’ improving sentiment due in part to easing of containment measures, and some signs of gradual improvements in economic activity based on high-frequency indicators,” according to the BSP.

 In July, the central bank said net FDI was up because of the net investments in debt instruments which increased by 60.1 percent to $643 million versus $402 million same time in 2019. Net investments in debt instruments are intercompany borrowing/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines.

 The BSP said the net FDI growth in July contributed to slowing down the decrease in year-to-date levels to just 10.9 percent as of end-July compared to 18.3 percent end-June.

 For the January-July tally, the BSP noted an increase in net equity capital investments to $991 million or up by 111.1 percent from $469 million in 2019.

 During the seven-month period, equity capital placements rose by 6.2 percent to $1.116 billion from $1.051 billion while withdrawals fell to $125 million or by 78.5 percent lower from $582 million last year.

 Investors from Japan, the Netherlands, Singapore and the US were the sources of these equity capital placements that were invested in sectors such as manufacturing, real estate, financial and insurance, and administrative and support service industries. 

 As for net investments in debt instruments and reinvestment of earnings as of end-July, both declined by 27.1 percent and 20.9 percent year-on-year respectively, to $2.297 billion and $506 million.

 For July only, net equity capital investments were down by 19.6 percent to $81 million when compared to $101 million in July last year.

 The BSP said this was “due primarily to lower equity placements of $89 million vis-à-vis $170 million in July 2019, but mitigated by a decline in withdrawals to $8 million from $69 million (last year).”

 In July, notable sources of investments came from Japan, China and the US as equity capital placements in construction, real estate, wholesale and retail trade, and manufacturing industries.

 However reinvestment of earnings dipped by 16.1 percent to $73 million in July from $87 million same month in 2019.

 For the whole of 2020, the BSP projects net FDI to close the year at $4.1 billion. The BSP expects FDI to improve to $6.5 billion in 2021.

 
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