THE country’s foreign direct investment (FDI) net inflows increased by 13.0 percent to $1.0 billion in February 2023 from the $926 million recorded in the same month last year, the central bank said on Wednesday.
The Bangko Sentral ng Pilipinas attributed the increase in FDI to “higher non-residents’ net investments in debt instruments, notwithstanding lower net equity capital placements and reinvestment of earnings.”
The year-to-date FDI net inflows amounted to $1.5 billion, 14.6 percent lower than the $1.8-billion net inflows posted in the first two months of 2022.
“All major FDI components yielded lower net inflows as foreign investors remained cautious amid persistent and broadening global inflation,” the BSP added.
Moreover, the central bank said during the reference month, the bulk of the equity capital placements emanated from Japan, the United States and the Cayman Islands.
“The said investments were channeled mostly to the 1) manufacturing; 2) real estate; 3) electricity, gas steam and air conditioning supply; and 4) financial and insurance industries,” the bank said.
The BSP statistics on FDI are compiled based on the Balance of Payments and International Investment Position Manual, 6th Edition (BPM6).
FDI includes (a) investment by a non-resident direct investor in a resident enterprise, whose equity capital in the latter is at least 10 percent, and (b) investment made by a non-resident subsidiary/associate in its resident direct investor, the BSP said.
For his part, Michael Enriquez, president of Sun Life Investment Management and Trust Corp. said, “majority of the increase was invested in local government bonds taking advantage of higher interest rates.”
Domini Velasquez, chief economist at China Banking Corp. said higher net FDI inflows could imply improving sentiments from source countries.
“Previously anticipated recessions did not materialize. In particular, the US economy continues to post improving economic conditions,” she added.
“Domestically, structural reforms such as the amendments to the retail trade liberalization act and the public services act will continue to be major drivers of FDI,” the economist’s said.
“We might see improvements in the second half of the year as these reforms gain traction. Additionally, investment pledges from the President’s trips to woo investors should also provide impetus to FDI,” Velasquez said.
Chief economist Michael Ricafort of Rizal Commercial Banking Corp. said that February FDIs are among the highest since the pandemic started, as the economy reopened toward greater normalcy and amid some of the investment commitments obtained by the administration after foreign trips in recent months.
“For the coming months, net FDIs could pick up further amid measures to further reopen the economy with no more restrictions as a policy priority, the Philippine economic growth expected to be among the fastest in the region, the country’s attractive demographics, economic reopening of China [which is the world’s second biggest economy] since December 2022, investment commitments obtained by the administration from overseas visit trips in recent months,” he added.
“Membership of the country into the Regional Comprehensive Economic Partnership [RCEP], which is the world’s biggest free trade agreement and led by China [the world’s second biggest economy], would help attract more FDIs to locate in the country as a production and/or marketing base, as well as an access point to bigger export markets of the other RCEP member countries in the region and in other parts of the world,” Ricafort said.
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