THE Philippine economy attracted the lowest level of foreign direct investments (FDI) in five years, the Bangko Sentral ng Pilipinas (BSP) reported on Wednesday.
Long-term investments made by foreign investors to the Philippines declined by 62.6 percent in December 2020 to hit $509 million, from $1.36 billion in December 2019.
This pushed the total FDI inflow to the Philippines to $6.54 billion in 2020, 24.6 percent lower than the $8.67-billion FDI inflow in 2019.
2020’s total FDI inflow to the Philippines is the lowest since 2015, when it hit $5.64 billion.
The BSP said the decline in the December FDI inflow was due mainly to base effects given significantly large inflows from net investments in equity capital and debt instruments in December 2019.
Overall, however, the BSP blamed the negative effects of the movement and travel restrictions to curb the spread of Covid-19 for the FDI decline, as well as the negative sentiment across the globe that came along with these restrictions.
“The disruptive impact of the pandemic on global supply chains and the weak business outlook adversely affected investor decisions in 2020,” the BSP said.
Broken down, foreign investors’ net investments in debt instruments contracted by 22 percent to hit $4.1 billion in 2020 from $5.2 billion in 2019.
Meanwhile, foreign investors’ net equity capital investments dropped by 35.7 percent to hit $1.5 billion in 2020 from $2.3 billion.
Bulk of the equity capital placements during the period came from Japan, the Netherlands, the United States, and Singapore.
Capital infusions were directed mainly to manufacturing, real estate, and financial and insurance industries.
Meanwhile, reinvestment of earnings declined by 13.6 percent to $978 million from $1.1 billion in 2019.
Pick-up seen
For the coming months, Rizal Commercial Banking Corporation (RCBC) economist Michael Ricafort said FDI are expected to start picking up.
“For the coming months, FDI could pick up, alongside with the expected further re-opening of the economy, as well as the possible signing into law of the CREATE [Corporate Recovery and Tax Incentives for Enterprises]. This would make some foreign investors on the sidelines to become more decisive and bring in more FDI into the country,” Ricafort said.
“Still, near record low interest rates/borrowing costs would also help attract more FDI into the country, as also supported by the country’s improved credit ratings in recent months,” he added.