According to the latest data from the central bank, FDIs in August posted a net inflow of $416 million, 45.1 percent lower than the $758 million recorded in the same month last year.
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FDI inflows slow for 6th month
Mary Grace Padin (The Philippine Star) - November 12, 2019 - 12:00am

MANILA, Philippines — Net inflow of foreign direct investments (FDIs) slowed down for the sixth consecutive month in August as uncertainties in the global market continued to dampen investor sentiment, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

According to the latest data from the central bank, FDIs in August posted a net inflow of $416 million, 45.1 percent lower than the $758 million recorded in the same month last year.

This has been the sixth straight month that the net FDI inflow has decreased since March this year.

“The ongoing uncertainty in the global environment continued to dampen investor sentiment, which caused postponements in investment plans,” the BSP said in a statement.

Based on BSP data, the bulk of FDI net inflows for the month came in the form of investments in debt instruments – consisting mainly of intercompany lending between foreign investors and their local affiliates – which slumped to $263 million from $534 million last year.

Non-residents’ net equity capital investments likewise plunged by 55.3 percent to $77 million from $172 million in the same month a year ago. This happened as equity placements decreased to $86 million, outweighing the decline in withdrawals, which reached $10 million.

Equity capital placements came mostly from Japan, the United States, Hong Kong, Cayman Islands and Singapore.

On the other hand, reinvestment of earnings grew by 46 percent to $77 million from $53 million, the BSP said.

For the first eight months, net FDI inflows dropped by 39.7 percent, reaching $4.5 billion compared to the $7.5 billion posted in the same period of 2018.

The BSP said investments in debt instruments during the period contracted by 32.5 percent to $3.3 billion from $4.9 billion.

Meanwhile, equity capital plunged by 73.4 percent to $536 million from $2 billion, as placements dipped by 49.6 percent to $1.1 billion from $2.2 billion. Pullout of investments also surged by 195.6 percent to $578 million from $196 million in the same period last year.

Equity placements were sourced largely from Japan, the United States, Singapore, China and South Korea.

Reinvestment of earnings during the eight-month period rose by 15.6 percent to $671 million from $581 million in the same period in 2018.

Sought for comment, Nicholas Mapa, ING Bank senior economist, said the August FDI figures reflect the continued confidence of existing investors in the Philippines. However, he said prospective investors are still on a wait-and see position pending the passage of the Corporate Income Tax and Incentives Reform Act.

“The August figures continue to exhibit the same trends we’ve noted in the past where so-called fresh FDI flows have gradually slowed while reinvestment of earnings from corporates already on the ground continue,” Mapa said in an e-mail.

“This pattern tells us two things: the companies that have set up shop here in the Philippines continue to believe in the long term viability of the Philippines as a market, while prospective investors may not be jumping head long into the Philippines, perhaps as they remain guarded while the CITIRA bill and its implications on fiscal incentives remains unpassed,” he said.   

The BSP had slashed the net FDI inflow target for 2019 to $9 billion instead of $10.2 billion.

The economy grew by at 6.2 percent in the third quarter as government spending starts to recover from the lag caused by the delay in the passage of the 2019 budget.

However, external factors led by the US-China trade war, continue to hamper the global economy, affecting emerging markets like the Philippines.

BANGKO SENTRAL NG PILIPINAS BSP FOREIGN DIRECT INVESTMENTS
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