FDI inflow slackens by 21% in 5 months

Due to high prices, interest rates

MANILA, Philippines — The inflow of foreign direct investments (FDI) fell by 20.8 percent to $3.41 billion in the first five months of the year from $4.3 billion in the same period last year, according to the Bangko Sentral ng Pilipinas (BSP).

“FDI remains subdued due to the effects of relatively higher price and interest rate levels globally,” the central bank said in a statement.

China Bank chief economist Domini Velasquez said that net FDI inflow remains weak due to a more challenging global environment.

“However, if we compare the Philippines with some of the ASEAN countries, Indonesia, Thailand and Vietnam seem to be more attractive investment destinations,” Velasquez said.

FDI inflow slowed despite the various liberalization laws passed by Congress.

Velasquez pointed out that Philippines-specific factors, such as high electricity rates, the state of the country’s infrastructure and red tape could be possible factors dampening investor interest.

Latest data showed that investments in debt instruments consisting mainly of intercompany borrowing between foreign direct investors and their subsidiaries or affiliates in the Philippines plunged by 27.1 percent to $2.4 billion from January to May this year compared to $3.3 billion in the same period last year.

Likewise, total reinvestment of earnings slipped by 6.1 percent to $370 million during the five-month period from $395 million in the same period last year.

On the other hand, equity other than reinvestment of earnings inched up by 4.1 percent to $632 million from $607 million.

Equity infusions from Japan, Germany and Singapore went up by 16.5 percent to $791 million from $679 million. The inflows were channeled into manufacturing with 54 percent, real estate with 15 percent, as well as financial and insurance with 11 percent.

On the other hand, equity withdrawals jumped by 120.8 to $159 million from $72 million.

For the month of May alone, the net inflow of FDI plunged by 34 percent to $488 million, the lowest since the $448 million registered last January, from $739 million in the same month last year.

Investments in debt instrument fell by 70.7 percent to $161 million in May from $551 million in the same month last year, while reinvestments of earnings slipped by 5.4 percent to $91 million from $96 million.

Equity infusions primarily from Germany, Japan and the US that were channeled to manufacturing and real estate surged by 147.8 percent to $257 million from $104 million, while withdrawals jumped by 69.9 percent to $22 million from $13 million.

In 2022, the Philippines managed to exceed its FDI inflow target of $8.5 billion despite the 23.2 percent plunge in net inflow to $9.2 billion from an all-time high of $11.98 billion in 2021.

The BSP lowered its projections for the net inflow of FDI to $9 billion from $11 billion this year and to $11 billion from $12 billion next year.