FDI inch up by 2% in Q1
![FDI inch up by 2% in Q1](https://media.philstar.com/photos/2022/06/13/dollar_2022-06-13_19-59-49.jpg)
MANILA, Philippines — Foreign direct investments (FDI) in the Philippines showed stability in the first quarter, growing by two percent amid risks such as the war in Eastern Europe and monetary tightening worldwide.
The Bangko Sentral ng Pilipinas (BSP) yesterday reported that FDI went up to $2.44 billion in the first quarter from $2.4 billion a year ago, as the rise in debt instruments outpaced the drop in equities.
While inflows in stocks slipped by 44 percent to $540 million during the period, investments in debt instruments jumped by a third to $1.9 billion.
In particular, equity capital placements plunged by 58 percent to $352 million and was only mitigated by a 61 percent plunge in withdrawals to $42 million. On the other hand, reinvestment of earnings dipped by three percent to $229 million.
The bulk of the equity capital placements originated from Japan, the US, Kuwait and Singapore. The BSP said the new investments were poured into manufacturing, real estate and financial and insurance activities.
Rizal Commercial Banking Corp. chief economist Michael Ricafort attributed the increase in FDI to reforms pursued by the government such as removing foreign ownership restrictions and restructuring the corporate tax bracket.
Ricafort said the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, which slashed the corporate income tax (CIT) rate to 25 percent, was the dealbreaker that foreign investors were looking for.
“Furthermore, the passage of reform measures in recent months, especially the CREATE Law that reduces the CIT by at least five percentage points – from 30 percent – retroactive to July 2020 and providing greater certainty on investments, will also continue to help attract more FDI to be more decisive and locate in the country,” Ricafort said.
On a monthly basis, however, the net inflows of FDI decreased by 10 percent to $727 million in March from $806 million a year ago. By type, investments in equity capital fell by 57 percent to $184 million, but grew by 45 percent to $543 million in debt instruments.
According to the BSP, equity capital placements dropped by 69 percent to $118 million in March from $378 million during the same month in 2021. The fresh investments came from Japan, US and Singapore and went to manufacturing, real estate and financial and insurance industries.
As reinvestment of earnings also slid by five percent to $78 million, the BSP said investors may grow wary on whether the global economy could sustain its recovery pace due to Russia’s invasion of Ukraine and the resulting inflationary surge everywhere.
“External risks, such as the impact of Russia’s invasion of Ukraine on commodities and financial market condition, the start of policy tightening in several major central banks and the resurgence of COVID cases in many Asian economies, may have contributed to investors’ concern about the outlook on the global economic recovery,” the BSP said.
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