FDI inflows plunge to $460 million in July

MANILA, Philippines — The net inflow of foreign direct investments (FDIs) plummeted by 64.4 percent to a 14-month low of $460 million in July from $1.29 billion in the same month last year amid adverse global conditions, according to the Bangko Sentral ng Pilipinas (BSP).

This was the lowest since the $455 million recorded in May last year. The net FDI inflow declined for the second straight month in July.

Data released by the central bank showed the net investments in debt instruments plunged by 80.6 percent to $213 million in July from $1.09 billion in the same month last year, as foreign companies settled more debt.

Equity capital placements from Japan, Singapore and the United States jumped by 63.5 percent to $155 million in July from $95 million a year earlier.

The equity inflows were channeled mainly to construction, manufacturing and real estate industries.

On the other hand, withdrawals fell by 69.1 percent to $18 million in July from $57 million in the same month last year.

“In July, FDI net inflows decreased due largely to the lower non-residents’ net investments in debt instruments of their local affiliates. The decrease more than offset the growth in net investments in equity capital,” the BSP said.

The BSP data also showed that reinvestment of earnings declined by 31.4 percent to $111 million in July from $162 million a year ago.

From January to July, the net FDI inflow slipped by 12 percent to $5.1 billion from $5.79 billion in the same period last year.

“All major FDI components yielded lower net inflows from January to July as foreign investors remained cautious amid continued adverse global conditions,” the central bank said.

The net investments of debt instruments, consisting mainly of intercompany borrowing between foreign direct investors and their subsidiaries or affiliates in the Philippines, decreased by 12.6 percent to $3.55 billion in the first seven months of the year from $4.07 billion in the same period last year.

Likewise, reinvestment of earnings slipped by 5.7 percent to $670 million from $710 million.

Equity placements from Japan, Malaysia, Singapore and the United States declined by 21.6 percent to $977 million from January to July compared to $1.25 billion in the same period last year.

Withdrawals also fell by 56.2 percent to $101 million during the seven-month period from last year’s $231 million.

The BSP has lowered its net FDI inflow target to $10.5 billion for this year, but expects a higher inflow of $12.5 billion for next year.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., has cited the increased global and local market volatility in June and July as markets experienced large selloffs amid the jumbo rate hikes delivered by the US Federal Reserve to tame inflation.

He said the net inflow has been partly weighed by higher inflation and interest rates, dampening new investments globally and locally.

Other risk factors for FDI data, the economist said, include adverse economic effects of the Russia-Ukraine war, more aggressive Fed rate hikes, higher financing costs, risk of recession in the US, and the continuation of some COVID-19 lockdowns in China.

However, Ricafort said the recent visit of President Marcos to Indonesia, Singapore, and the United States yielded over $18 billion in investment pledges.

He said the pick up in FDIs in recent months also reflects some easing of supply chains and logistics locally and worldwide from the height of the lockdowns from 2020-2021.

“Thus, FDIs remain one of the bright spots and one of the major pillars of the economic recovery program from COVID for the Philippine economy, still among the highest since the pandemic started in recent months, alongside near record highs in exports and the record high in imports on a monthly basis,” he said.