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BSP: March FDI surge by 139.5% to hit $808 million

LONG-TERM investments placed by international players in the Philippines soared in March this year as global vaccination programs continued to roll out, the Bangko Sentral ng Pilipinas (BSP) reported on Thursday.

Foreign direct investments (FDI) posted a 139.5-percent growth in March this year to hit $808 million during the month, up from the $337 million in the same month last year.

The strong March FDI performance pushed the first quarter FDI numbers of the country to $2.38 billion in the first three months of the year, growing by 45.1 percent from the $1.64 billion in the same three-month period in 2020.

FDI are investments that are made by foreign players to the Philippines in the hopes 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.

“March 2021 FDI increased on account of improved investor sentiment amid the gradual resumption of domestic activities, while adhering to the minimum health standards, and government efforts to accelerate the vaccination program,” the BSP said.

Broken down, the increase in FDI to the country in the first three months of the year was mainly driven by the 113.2-percent growth in non-residents’ net investments in debt instruments to $1.4 billion from $671 million.

Reinvestment of earnings also improved by 5.4 percent to $225 million from $213 million.

Net investments in equity capital, however, still contracted by 4.3 percent to hit $721 million. Nonetheless, the strong March performance brought the contraction significantly downward from 29.1 percent in February 2021.

Equity capital placements during the quarter were sourced largely from Singapore, Japan, the United States and the Netherlands. These were invested primarily in the electricity, gas, steam, and air-conditioning; financial and insurance; and manufacturing industries.

Rizal Commercial Banking Corp. (RCBC) economist Michael Ricafort said the strong March performance of FDI could signal that the worst is over for the country’s FDI numbers, in view of the gradual re-opening of the local and global economies.

For the coming months, Ricafort said FDI to the country could be sustained by increased government spending on infrastructure, the timely approval of the national budget, continued accommodative monetary policy settings, the passage of key economic laws and further reopening of the economy.

However, the offsetting factors to sustained FDI inflows include the relatively higher new Covid-19 local cases recently, including of the new variants, as these may lead to risk of further lockdowns and travel restrictions, thereby could slow down economic recovery prospects.

Image courtesy of Nonoy Lacza

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