FDI inflows surge in August, slowing 8-month decline

MANILA, Philippines — More foreign direct investments (FDI) flowed into the country for the fourth straight month in August, surging by 46.9 percent to $637 million on renewed investor confidence despite the raging coronavirus pandemic, according to the Bangko Sentral ng Pilipinas (BSP).

The strong performance in August slowed the pace of decline during the eight-month period to only 5.6 percent from a high of nearly 28 percent in April.

From January to August, the net FDI inflows amounted to $4.43 billion, slightly lower than the $4.69 billion recorded in the same period last year.

“The four consecutive months of growth since May resulted in the considerable narrowing of the cumulative net FDI contraction of 27.9 percent in April 2020,” the BSP said.

According to the BSP, equity other than reinvestment of earnings almost doubled to $1.1 billion during the eight-month period from last year’s $550 million.

Equity capital from Japan, the Netherlands, US, and Singapore channeled to manufacturing, real estate, financial and insurance, administrative and support services as well as wholesale and retail industries grew by 8.1 percent to $1.23 billion from January to August from $1.14 billion in the same period last year.

On the other hand, withdrawals plunged by 77.1 percent to $136 million from $591 million.

Net investment in debt instruments consisting mainly of loans extended by parent companies abroad to their local affiliates declined by 19.3 percent to $2.76 billion in the eight-month period from $3.42 billion a year ago.

Likewise, reinvestment of earnings retreated by 20.6 percent to $577 million from $727 million.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the FDI data in recent months manifested resiliency and defied the economic challenges largely brought about by the COVID-19 pandemic.

“Economies locally and in many countries around the world have further re-opened from lockdowns, thereby allowing more inflows of FDIs into the Philippines, as facilitated by improvements in the global supply chains and logistics,” Ricafort said.

For August alone, the BSP reported a net FDI inflow of $637 million or $203 million higher than the $434 million recorded in the same month last year.

“The FDI net inflows increased for the fourth consecutive month, owing to investors’ renewed confidence as the national government’s fiscal stimulus and BSP’s accommodative monetary policy stance to mitigate the impact of COVID-19 pandemic gained traction along with the easing of quarantine measures in the country,” the central bank said.

The BSP traced the growth in August to the 72.2 percent surge in net investments in debt instruments to $459 million, offsetting the 17.9 percent decline in reinvestment of earnings to $71 million.

Data showed equity from Japan, the US and the British Virgin Islands infused into manufacturing, real estate, financial and insurance as well as professional, scientific, and technical industries increased by 30.1 percent to $118 million in August.

On the other hand, withdrawals increased at a slower pace of 7.1 percent to $10 million in August.

“More FDIs also spurred further by near record low interest rates locally and worldwide, thereby making borrowing more compelling to finance investments worldwide, including those for FDIs,” Ricafort said.