FEARS that global economic growth will slow spooked foreign investors this year, causing the country’s Foreign Direct Investments (FDIs) to contract 14.7 percent between January and July 2023 despite the growth in FDIs in July, the Bangko Sentral ng Pilipinas (BSP) said.
Data showed FDIs settled at $4.7 billion, slower than the $5.5 billion in the same period last year.
“FDI declined amid concerns over slowing global growth,” BSP said in a statement released on Tuesday.
In July, FDIs reached $753 million, higher by 35.7 percent than the $555 million recorded net inflows in the same month last year.
BSP traced the growth in FDI to the 108.4-percent increase in nonresidents’ net investments in debt instruments to $575 million in July 2023 from $276 million in July 2022.
This, the central bank said, more than offset the decrease in nonresidents’ net investments in equity capital other than reinvestment of earnings by 52.6 percent to $65 million from $137 million; and their reinvestment of earnings by 20.1 percent to $114 million from $142 million.
“By country of source, equity capital placements during the month came mostly from Japan, the United States and Singapore. Said investments were channeled primarily to the manufacturing; real estate; and financial and insurance industries,” BSP said.
The BSP explained that statistics on FDI are compiled based on the Balance of Payments and International Investment Position Manual, 6th Edition (BPM6).
FDI includes investments by a nonresident direct investor in a resident enterprise, whose equity capital in the latter is at least 10 percent, and investments made by a nonresident subsidiary/associate in its resident direct investor. FDI can be in the form of equity capital, reinvestment of earnings, and borrowings.
Israel-Hamas
In an economic note, Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said
the Israel-Hamas war “partly weighed on global market sentiment amid geopolitical risks that could involve Iran, which is a major global oil producer and finances/supports Hamas.”
Ricafort said if Iran will become involved in the conflict, it could block the Strait of Hormuz, an important passage for international oil tankers.
Thus far, Ricafort said, the Israel-Hamas war led to some flight to the safest havens/investments such as US Treasuries and other safe sovereign bonds. This is consistent when there are geopolitical uncertainties and will hold until the situation stabilizes.
However, Ricafort sad there would be minimal adverse effects on the economy, provided there are no evacuations or repatriation of OFWs back to the country, as seen in recent years.
“The effects of the Israel-Hamas conflict on the financial markets and economy remain manageable, as long as the conflict does not escalate and spread to other areas/countries in the Middle East, especially in major oil producers that are also host countries for many OFWs,” Ricafort said.
On Sunday, the President announced all concerned government agencies have been mobilized to ensure the safety of Filipinos in Israel after it suffered surprise attacks from militant Hamas forces during the weekend.
There are around 450 Filipinos in south Israel and Gaza Strip where intense fighting is happening between the renewed war between Israeli forces and the Hamas group.
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