FDI inflows sink 44% in July – BSP

7-month tally dips 24% to $4.07 billion

MANILA, Philippines —  Foreign direct investment (FDI) net inflows into the Philippines fell sharply in July from a year ago, pulling the seven-month tally down by nearly a quarter as all major components of foreign investment weakened.

Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed net FDI inflows reached $689 million in July, 44.1 percent lower than the $1.23 billion recorded in the same month last year. The figure, however, was 54.1 percent higher than the $447 million posted in June.

FDI refers to actual investments made by foreign investors that establish a lasting interest in Philippine companies. This generally covers investments where a foreign investor owns at least 10 percent of a local enterprise.

The year-on-year decline in July was driven mainly by weaker equity capital investments and lower intercompany borrowings, which more than offset an increase in earnings retained by foreign investors in their Philippine operations.

Net investments in debt instruments, which largely represent borrowing and lending between foreign direct investors and their local subsidiaries or affiliates, dropped by 49.1 percent to $365 million from $717 million a year earlier.

Net equity capital investments other than reinvested earnings also plunged by 55.5 percent to $186 million from $418 million.

Gross equity placements, or fresh capital put into Philippine companies, declined to $199 million from $460 million. Equity withdrawals likewise fell to $13 million from $42 million.

Reinvestment of earnings was the only major FDI component to post an increase in July, rising by 39.9 percent to $138 million from $99 million a year ago. Reinvested earnings refer to profits that foreign investors retain in their Philippine businesses instead of taking them out of the country.

For the seven-month period, net FDI inflows declined by 23.9 percent to $4.07 billion from $5.35 billion in the same period last year.

The BSP said the decline “reflected lower net inflows across all major FDI components.”

Net investments in debt instruments, still the largest component of FDI, fell by 30.6 percent to $2.43 billion from $3.5 billion from January to July last year.

Reinvestment of earnings dropped by 14.2 percent to $968 million from $1.13 billion, while net equity capital investments excluding reinvested earnings slipped by 6.9 percent to $675 million from $725 million.

The decline in net equity investment came despite a sharper drop in withdrawals. Gross equity placements fell by about 23 percent to $924 million from $1.21 billion, while withdrawals nearly halved to $249 million from $481 million.

The BSP said equity capital placements during the seven-month period came mainly from Japan, the United States and Singapore. These funds were directed largely toward manufacturing, financial and insurance activities and real estate.