FDI net inflows up by 20.6% in first two months

Published May 10, 2021, 5:27 PM

by Lee C. Chipongian

The central bank said it registered $1.569 billion of foreign direct investment (FDI) net inflows in the first two months of 2021, up by 20.6 percent year-on-year or from $1.301 billion.

For the month of February only, FDI net inflows of $608 million was lower by 2.2 percent from $621 million same time last year.

The Bangko Sentral ng Pilipinas (BSP) said the January-February net inflows resulted from the 67.7 percent expansion in non-residents’ net investments in debt instruments of $1.051 billion compared to $626 million same time in 2020.

(Ali Vicoy/Manila Bulletin)

As of end-February, the BSP also noted that non-residents’ net investments in equity capital declined by 29.1 percent to $372 million from $525 million. “This was mainly due to the contraction in equity capital placements to $451 million (from $610 million), which more than offset the drop in withdrawals to $79 million (from $85 million),” the BSP explained.

In the same two-month period, most of equity capital placements came from investors in Singapore, Japan, the Netherlands, and the US, and these funds were invested in sectors such as financial and insurance, manufacturing, and real estate industries. Reinvestment of earnings, in the meantime, fell by 2.3 percent year-on-year to $146 million.

The BSP said that for the month of February, the “slight” 2.2 percent year-on-year decline was because of the 88.3 percent drop in non-residents’ net investments in equity capital to $20 million. This came as equity capital placements also declined by 62.1 percent to $89 million in February 2021 and at the same time, withdrawals were up by 13.6 percent to $69 million.

Most of equity capital placements in February came from investors in Japan, the US, the Netherlands, Malaysia, and Singapore. These funds were placed in the manufacturing and real estate sectors, as well as wholesale and retail trade sector, financial and insurance, and electricity, gas, steam, and air-conditioning supply industries.

Also just for February, the BSP noted a 36.1 percent year-on-year increase in non-residents’ net investments in debt instruments to $515 million which  “tempered the decline in FDI”. Reinvestment of earnings rose by 6.1 percent in February to $72 million.

The BSP’s reporting of FDI which is in the form of equity capital, reinvestment of earnings, and borrowings, covers actual investment inflows.

For 2021, the BSP is projecting a net FDI inflows of $7.8 billion. Last year, FDI net inflows reached $6.54 billion, down by 24.6 percent from 2019’s $8.67 billion.