LONG-TERM investments made by foreign investors in the country are expected to rise in the coming months as economies and logistics normalize in other parts of the world, a local economist said.
In his note following the Bangko Sentral ng Pilipinas’ (BSP) announcement of the Philippines’s foreign direct investment (FDI) numbers, Rizal Commercial Banking Corporation (RCBC) economist Michael Ricafort said the worst is likely over for the country’s FDI.
“[The] pickup in FDIs in recent months may reflect some easing and normalization of supply chains and logistics locally and worldwide as economies further re-open, thereby allowing more FDIs to flow into the country,” Ricafort said.
“Thus, the worst for the FDI data and other major economic data could have been seen already at the height of the lockdowns,” he added.
FDIs are investments 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 (FPIs), FDIs usually create jobs for Filipinos and have a multiplier effect on the economy.
1st-half flows: $4.3B
The BSP reported on Friday that FDIs to the country hit $4.3 billion in the first semester of the year. This represents a 40.7-percent increase from the $3.1 billion net inflows in the same period in 2020.
The economist said the economic foundations of the country would still make the Philippines a good long-term investment stop for global players as they start investing again after the pandemic.
“The improved economic and credit fundamentals of the Philippines in recent years, amid attractive demographics, with the 12th largest population in the world at about 110 million, would make the Philippines a compelling investment destination,” the economist said.
However, he warned that despite having this, the rapid rise of Covid cases in the country may hold back investor plans towards the country.
“Offsetting risk factors are the relatively higher new Covid-19 local cases among record highs amid threats from new coronavirus variants [especially the Delta and Lambda variants] that are more contagious and could lead to risk of further lockdowns and travel restrictions, [and] thereby could slow down economic recovery prospects, including FDIs,” Ricafort said.