FDIs expand in April as economy further reopens

MANILA, Philippines — Foreign direct investments expanded in April, due in part to the economy's reopening back then but an analyst expects some slowdown as headwinds emerged in past months.

What’s new

Data from the Bangko Sentral ng Pilipinas released Monday revealed FDIs recorded a net inflow of $989 million in April, up 48.3% year-on-year. A net inflow means more FDIs entered the country against those that left.

Year-to-date, FDI posted a net inflow of $3.4 billion, up 12.1% on an annual basis.

Why this matters

Unlike the so-called “hot money” which enters and leaves markets with ease, FDIs are firmer commitments that provide jobs for Filipinos, so the government wants to attract more FDIs and not only keep existing ones.

For this year, the central bank projects a full-year haul of $11 billion net inflow, higher than the actual $10.5 billion net inflow recorded last year.

What an analyst says

Nicholas Antonio Mapa, senior economist at ING Bank in Manila, observed that foreign investments priced in the national government's full reopening of the economy, as cases were declining following an Omicron variant wave at the start of the year.

"The pickup in FDI reflects the positive fallout from reopening of the economy.  With the Philippines posting a solid 1Q GDP report and with mobility restrictions lowered, this may have prompted investments into the Philippines, including the placement of equity or “fresh FDI,"" he said in an emailed commentary.

By May, the global economy was dragged down by a rising inflationary trend propelled by persistently expensive oil prices as a result of Russia's invasion of Ukraine.

"However, we could see a moderation in the near term as the economy faces short-term headwinds but should the Philippines weather the turbulence, we can expect FDI to resume once we have cleared the present challenges," Mapa added.

Other figures

• Data showed that in the first four months of 2022, equity capital placements, a measure of new FDIs, slipped 37.2% year-on-year to $517 million.
• Most of the inflows in April were sustained by intercompany borrowings between multinational companies and their local offices, which rose 40.6% year-on-year to $684 million.
• Reinvestment of earnings improved 10.2% on-year to $99 million during the month.