BSP revises FDI projection upward to $9.2 B

MANILA, Philippines — The Philippines is seen booking over $9 billion worth of foreign direct investments (FDIs) this year amid the improving global perception of the country as an investment destination.

The Bangko Sentral ng Pilipinas (BSP) has revised upwards its FDI inflow projection to $9.2 billion instead of $8.2 billion this year amid the anticipated higher net inflow and lower net outflow in the other investments account.

The central bank said the higher projection would be “driven primarily by the sustained positive developments in the domestic economy, expected improvement in global economic conditions relative to 2017, as well as the implementation of public-private partnership projects that were approved and awarded in previous years.

“FDI uptick is further seen in 2018 in line with the continued fasttracking and modernization of the country’s soft and hard infrastructure, growing interest from non-traditional investment sources, and

improved global perception of the Philippines as an investment destination,” the BSP said.

The Duterte administration has earmarked as much as P9 trillion to bankroll key infrastructure projects under the Build Build Build program as part of its massive infrastructure build up until 2022.

Likewise, the country’s gross domestic product (GDP) growth picked up to 6.8 percent in the first quarter of the year from the revised 6.5 percent in the fourth quarter of last year.

The Philippines has booked 77 quarters of uninterrupted economic growth. Economic managers pegged a GDP growth target of seven to eight percent this year from 6.7 percent last year.

Despite the higher projection, the FDI inflow this year would be lower than last year’s record inflow of $10.05 billion. Last year’s FDI inflows were higher than the $8.28 billion recorded in 2016 as investors continued to view the Philippines as a favorable investment destination.

Latest data showed FDI inflows jumped 43.5 percent to $2.17 billion in the first quarter of the year from $1.52 billion in the same quarter last year reflecting investors’ continued positive outlook on the Philippine economy on the back of sound macroeconomic fundamentals and robust growth prospects

During an economic briefing held in April, Socioeconomic Planning Secretary Ernesto Pernia said the Philippines would register a record $12 billion FDI inflows this year on the back of the country’s strong macroeconomic fundamentals.

Despite the strong FDI inflows, the BSP now expects a higher balance of payments (BOP) deficit of $1.5 billion instead of $1 billion this year. The BOP is the difference in total values between payments into and out of a country over a period.

A deficit means more foreign exchange flows out of the country to pay for the importation of more goods, services and capital than what flows in from exports.

Latest data showed the country’s BOP deficit swelled to $1.5 billion in the first four months of the year from only $78 million in the same period last year due to the widening trade deficit.

On the other hand the country’s foreign exchange buffer is expected to thin further with the gross international reserves (GIR) declining to $80 billion or equivalent to seven months worth of import cover.

The buffer slumped to its lowest level in more than three years thinning to $78.97 billon in May from the revised $79.61 billion in April due to strong outflows.