LONG-TERM investments made by foreign investors to the Philippines grew strongly in the first six months of the year, the Bangko Sentral ng Pilipinas (BSP) reported on Friday.
BSP Governor Benjamin Diokno told reporters that net inflows of foreign direct investments (FDI) to the country hit $4.3 billion in the first semester of the year, representing a 40.7-percent increase from the $3.1-billion net inflows in the same period in 2020.
FDI are investments made by foreign players to the Philippines in the hope of long-term return. Since these are in the country for a longer term compared to their short-term counterpart, the foreign portfolio investments (FPI), FDI usually creates jobs for Filipinos and has a multiplier effect on the economy.
The BSP said the higher cumulative FDI net inflows was due mainly to the 86.5-percent growth in non-residents’ net investments in debt instruments to $2.8 billion from $1.5 billion in 2020.
Likewise, reinvestment of earnings rose by 7.7 percent to $522 million from $484 million.
However, net investments in equity capital declined by 8.9 percent to $971 million from $1.1 billion a year ago.
The strong first-half print of the country’s FDI was supported by the strong June FDI net inflow, which hit $833 million during the month. This is 60.4 percent higher than the $519-million net inflow in the same month last year.
Broken down, FDI net inflows in June 2021 increased mainly on account of infusion by foreign direct investors to their subsidiaries/affiliates in the Philippines in the form of net investments in debt instruments, which rose by 151.8 percent to $630 million.
Reinvestment of earnings also grew by 23.4 percent to $110 million from $89 million.
However, foreign net investments in equity capital declined by 48.4 percent to $93 million in June 2021 from $180 million in the same month last year. This was due to the downturn in equity capital placements by 38.2 percent to $119 million from $192 million, along with the increase in equity capital withdrawals by 112 percent to $26 million from $12 million.
The BSP blamed the decline in equity capital investment during the month to concerns over the spread of more transmissible Delta variant, which “may have prompted investors to remain on the sidelines.”
Equity capital placements during the month originated mostly from Japan, the United States, and Singapore. These were invested largely in the manufacturing; real estate; and financial and insurance industries.