Foreign direct investments sustain growth in June

MANILA, Philippines — Foreign direct investments (FDI) recovered for the second consecutive month in June as investors welcomed the economy back in business, although such a trend may be temporary in the face of recession.

FDI posted a net inflow of $481 million on the first month of economic reopening in June, up 7.1% year-on-year, data released by the Bangko Sentral ng Pilipinas (BSP) on Tuesday showed. A net inflow indicates more job-generating investments entered the country versus those that left.

The latest reading was preceded by a 39.1% annual growth in May, further tempering the FDI slump in the first half to 18.3% year-on-year to $3 billion.

“This positive development was underpinned by the gradual reopening of advanced economies with investment interest in the Philippines,” the central bank said in a statement.

But Nicholas Antonio Mapa, senior economist at ING Bank in Manila, was not so optimistic. “The growth in June is indeed a welcome development but I am not sure if this trend can continue or that a possible rebound can bring year-to-date growth back into expansion territory,” Mapa said in an email.

“The bounce in June may be linked to a one off investment by a big conglomerate but subsequent big ticket investments may not be numerous in this economic environment,” he added.

BSP itself is expected tepid investor sentiment this year. In May, the central bank slashed its FDI forecast to $4.1 billion in net inflows by yearend, down from the original $8.1 billion, and set for a third straight year of decline under the Duterte administration.

Last year, FDI net inflows reached $7.68 billion, down 23.1% year-on-year from $9.9 billion in 2018. In 2017, FDI peaked at $10.26 billion, figures showed.

Breaking down the June figures, equity capital placements, or new FDIs, jumped 137.6% annually to $185 million while investments withdrawn fell 74.9% on-year to $12 million, yielding net placements of $173 million.

Majority of fresh FDIs during the month came from Japan, the United Kingdom and the US. These new inflows were mainly invested in companies engaged in manufacturing, human health and social work, financial and insurance, and real estate, the BSP reported.

From January to June, equity placements surged 16.6% to $1 billion, with investors from Japan, the Netherlands, Singapore and the US being the top contributors during the period.

On the other hand, intercompany borrowings, or money that went between foreign headquarters and their local affiliates here, sagged 28.8% to $229 million in June. For the entire first half, this segment dropped 39.8% to $1.65 billion, accounting for the bulk of FDI.

Meanwhile, reinvested earnings were 19.4% lower in June than year-ago levels to $80 million. From January to June, this kind of inflows sank a faster 21.7% to $433 million.