BSP expects FDI, remittance inflows to stabilize

MANILA, Philippines — The Bangko Sentral ng Pilipinas sees steady inflows from foreign direct investments (FDIs) and remittances from overseas Filipino workers as the adverse impact of the global health pandemic on the country’s external accounts reached its peak during the second quarter of the year, according to the Bangko Sentral ng Pilipinas (BSP).

In a virtual press briefing, BSP Governor Benjamin Diokno said preliminary data in the third quarter suggest the worst is over.

‘’As we monitor the impact of the pandemic on the external accounts, it can be observed that the effects were mostly felt during the second quarter of 2020, particularly during the months of April and May, as stricter lockdown measures were imposed by the government as part of its efforts to fight the spread of the virus,” Diokno said.

Data showed the country’s overall balance of payments (BOP) position posted a surplus of $2.1 billion in September, bringing the year-to-date surplus position to $6.9 billion.

The cumulative BOP surplus of almost $7 billion supported mainly by higher net foreign borrowings by the national government, lower merchandise trade deficit as well as along with net inflows from OFW remittances and FDIs was higher than the $5.6 billion surplus recorded in the same period a year ago.

Diokno said cash remittances coursed through the banks rose by 9.3 percent to $2.6 billion in September, bringing the nine-month to $21.88 billion or 1.4 percent lower.

“This is much better than the five percent contraction earlier projected by the BSP and the revised two percent decline,” Diokno added.

On the other hand, FDI net inflows continued its growth momentum in August, rising by 46.9 percent year on year to reach $637 million.

Diokno said net FDI inflows increased for the fourth consecutive month owing to investors’ renewed confidence as the central bank’s accommodative monetary policy stance and the national government’s fiscal support to mitigate the impact of COVID-19 gained traction, along with the easing of lockdown measures starting in the third quarter.

On a cumulative basis, FDI net inflows reached $4.4 billion from January to August.

The BSP expects a higher net FDI inflow of $5.6 billion instead of $4.1 billion this year before increasing to $7 billion next year. FDI inflows into the country steadily declined after hitting a record $10.3 billion in 2017.