FDIs down 16% to $819 million in January

MANILA, Philippines — After hitting an all-time high last year, the net inflow of foreign direct investments (FDI) declined by 16 percent to $819 million in January from $975 million in the same period last year as the National Capital Region (NCR) and nearby provinces were placed anew under Alert Level 3 amid the resurgence in COVID  cases due to the highly transmissible Omicron variant.

Data from the Bangko Sentral ng Pilipinas showed equity capital placements from Japan, the US, the Netherlands and Malaysia plunged by 68 percent to $118 million from $370 million.

The capital infusions were channeled mainly to the manufacturing, financial and insurance as well as real estate industries.

On the other hand, the BSP said withdrawals went up by 6.8 percent to $11 million in January from $10 million a year ago.

“This may be due largely to investor concerns following the resurgence of cases of the highly transmissible Omicron   variant in the country and the re-imposition of stricter quarantine measures in early January 2022,” it  said.

Likewise, reinvestment of earnings slipped by 1.4 percent to $78 million in January from $79 million in the same month last year.

On the other hand, the central bank reported an 18.3 percent increase in non-residents’ net investments in debt instruments to $634 million from $536 million as multinational companies continued to inject more money into their affiliates in the Philippines to finance their operational requirements

After jumping by 54.2 percent to a record high of $10.5 billion last year from $6.8 billion in 2020, the BSP now expects a higher FDI net inflow of $11 billion instead of $8.5 billion this year and $11.8 billion next year.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), said the gradual easing of the quarantine and lockdown protocols to Alert Level 1 may improve FDI data in the coming months.

Despite hitting a four-month low in January, Ricafort said net FDI is still among the highest since the pandemic started and remains a bright spot for the economy, as these would still lead to more economic activities as well as leading the creation of more jobs.

“Thus, FDIs remain one of the bright spots and one of the major pillars of the economic recovery program from the pandemic for the Philippine economy, still among the highest since the pandemic started in recent months,” Ricafort said.

Ricafort said the passage of Republic Act 11534 or the Corporate Income Tax and Incentives Reform Act (CREATE), which slashed the corporate income tax to 25 from 30 percent, would provide greater certainty on investments and help attract more FDIs.

Other reform measures, Ricafort said, include the easing foreign ownership limits as already signed into law such as the amendments to the Public Services Act, Foreign Investments Act, Retail Trade Liberalization Act, among others.