The Philippines net foreign direct investments (FDIs) declined by 8.6 percent to $4.832 billion for the first three quarters this year as against $5.289 billion in the same period last year as the COVID-19 pandemic continued to dampen investor sentiments.
“The decline in FDI inflows reflected the worldwide cautious investment climate, following the continued effects of the prolonged COVID-19 health crisis on the global economic outlook,” said the Bangko Sentral ng Pilipinas (BSP) in a statement.
FDIs are equity capital, reinvestment of earnings, and borrowings. As explained by the BSP, it includes investment by a non-resident direct investor of at least 10 percent equity capital, and investment by a non-resident subsidiary or associate in its resident direct investor.
As of end-September, non-residents’ net investments in debt instruments amounted to $2.996 billion, down 22 percent from $3.839 billion same time in 2019. Reinvestment of earnings also decreased by 20.5 percent to $639 million from $804 million.
However, the BSP said the “expansion in non-residents’ net investments in equity capital by 85.2 percent to $1.2 billion (from $646 million) helped ease the decline in the cumulative FDI net inflows.”
Net investments in equity capital totaled $1.347 billion, up by 6.4 percent from $1.266 billion while withdrawals declined by 75.7 percent to to $151 million from $620 million.
“Bulk of the equity capital placements during the period originated from Japan, the Netherlands, the US, and Singapore (and) these were directed mostly to manufacturing, real estate, and financial and insurance industries,” said the BSP.
For the month of September only, net FDI also fell by 12.3 percent year-on-year to $523 million following four months in a row of double-digit year-on-year increases.
“The two-week modified enhanced community quarantine (MECQ) in Metro Manila and surrounding areas in the first half of August may have dampened investor sentiment on prospects of the economy’s re-opening,” said the BSP.
In September, non-residents’ net investments in debt instruments declined by 14.3 percent to $362 million from $423 million same time last year. Reinvestment of earnings also dropped by 19.7 percent to $62 million from $77 million.
“The decline in FDI net inflows were mitigated partly by the 2.5 percent growth in non-residents’ net investments in equity capital, which reached $99 million from $96 million in September last year,” said the BSP.
The BSP also noted that the decrease in placements of equity capital by 8.6 percent to $114 million from $125 million, was slower compared to the decline in withdrawals which contracted by 46.5 percent to $15 million from $28 million.
The BSP has a 2020 FDI projection of $5.6 billion nd $7 billion in 2021 based on global and local projections that economies will start recovering from the pandemic.