Net FDI inflows drop 18% in H1

MANILA, Philippines — The net inflow of foreign direct investments (FDIs) declined by 18.3 percent to $2.99 billion in the first half from $3.67 billion in the same period last year, according to the Bangko Sentral ng Pilipinas (BSP).

The latest contraction, however, was an improvement from the nearly 22 percent decline recorded from January to May, due to the rebound in the last two months of the first half as countries with investment interest in the Philippines started to reopen amid the COVID-19 pandemic.

“The growth in FDI net inflows in June further eased the cumulative contraction in FDI to 18.3 percent in January to June from a cumulative decline of 21.9 percent in January to May,” the BSP said.

Net investment in debt instruments consisting mainly of loans extended by parent companies abroad to their local affiliates fell by almost 40 percent to $1.65 billion in the first half from $2.75 billion in the same period last year.

Reinvestment of earnings also retreated by 22 percent to $433 million from $553 million.

The BSP said equity capital placements primarily from Japan, the Netherlands, Singapore and the US channeled to manufacturing, real estate, financial and insurance, as well as administrative and support service industries, went up by 16.6 percent to $1.03 billion in the first half from $881 billion a year ago.

On the other hand, withdrawals plunged by more than 77 percent to $117 million in the first semester from $512 million a year ago.

For June alone, the net FDI inflow rose by 7.1 percent to $481 million from $449 million in the same period last year. In May, the net inflow surged by 42 percent.

“This positive development was underpinned by the gradual reopening of advanced economies with investment interest in the Philippines, and the country’s sustained strong macroeconomic fundamentals despite the COVID-19 pandemic,” the BSP said.

Capital placements from Japan, the United Kingdom and the US soared by 137.6 percent to $185 million in June from $78 million in the same month last year, while withdrawals declined by 74.9 percent to $12 million from $49 million.

The BSP also noted a sharp 28.8 percent decline in investments in debt instruments to $229 million in June from $321 million a year ago, as well as a 19.4 percent drop in reinvestment earnings to $80 million from $99 million.

The economy stalled as the entire Luzon was placed under enhanced community quarantine in mid-March to slow the spread of the virus.

As a result, the gross domestic product (GDP) contracted by nine percent in the first half after shrinking by a record 16.5 percent in the second quarter.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said FDI inflows continue to pick up as the global economy reopens from lockdowns, resulting in the easing of constraints in logistics and the normalization of global supply chains.

Ricafort attributed the strong FDI inflows in June to record low interest rates locally and worldwide, and the country’s robust investment grade credit ratings.

“The country’s improved credit ratings despite the COVID-19 pandemic also increased international investor confidence and more foreign investment inflows into the Philippines,” he said.