FDIs brace for global recession as inflows retreat in September

MANILA, Philippines — Foreign direct investments into the Philippines continue to be strained in September as a projected global economic recession dampened investor sentiment. 

Data released by the Bangko Sentral ng Pilipinas on Monday showed that while FDIs amounted to $626 million in net inflows, this was lower by 7.9% year-on-year. 

In the first nine months, FDI posted a net inflow of $6.7 billion, down 10% on an annual basis. That said, FDIs represent firmer commitments from foreign investors that generate jobs for Filipinos unlike the so-called “hot money”, which enters and leaves markets with ease.

The BSP projected the Philippines would rack up $11 billion in net FDI inflows this year, higher than the actual $10.5 billion generated last year.

Sought for comment, Domini Velasquez, chief economist at China Banking Corp., expects this downtrend to persist through 2023. Velasquez hinged her projection on the impact of the US Federal Reserve’s aggressive interest rate hikes to tame inflation stateside.

“This bright spot we were previously looking at—amendment to the Public Services Act, seems to be delayed as the IRR is yet to be approved,” she said in a Viber message. 

Nicholas Antonio Mapa, senior economist at ING Bank in Manila, said that investor confidence may need some boost on account of the dismal outlook.

“This could show that investor confidence remains but may be in need of a boosts given concerns about the global and domestic outlook,” he said in a Viber message. 

Data broken down revealed that equity capital placements, a measure of new FDIs, skyrocketed 158.7% year-on-year to $230 million in September. 

Inflows were hampered by a sizeable decline in intercompany borrowings between multinational companies and their local affiliates. BSP reported a 36.8% plunge year-on-year to $351 million during the month. 

Reinvestment of earnings inched down 4.8% on-year to $88 million in September.

Velasquez added that China’s easing of pandemic restrictions could liven up global prospects, but this would not be enough.

“However, this will likely not offset weakening investor sentiments in the rest of the world,” she added.