BSP sets review of FDI forecast for 2006

The Bangko Sentral ng Pilipinas (BSP) is going to review its estimates for foreign direct investment inflows (FDIs) this year, indicating that actual funds coming into the country could be bigger than the projected $2 billion.

The BSP said that based on the latest indicators from the National Statistics Office (NSO), foreign direct investment (FDI) inflows are stronger than anticipated in the second quarter of the year.

According to Iluminada Sicat, director of the BSP’s Department of Economic Statistics (DES), the whole-year projections would have to be reviewed and possibly revised upwards based on the second quarter data.

"Our existing projections were based on March data which is what we had at the time," Sicat said. "We will have to review this now based on the latest data."

As of the end of the first semester, total FDI inflows registered by the BSP amounted to $996 million.

Net FDIs in June 2006 alone posted a net inflow of $210 million, turning around from the net outflow of $23 million during the same period last year.

The BSP said the increase in net FDIs reflected the improving investor sentiments as the National Government managed to keep its fiscal deficit in check and the economy performed slightly better than expected.

The BSP said investor confidence was also bolstered by the country’s record-high gross international reserves (GIR) as well as the gradualeasing of the average inflation rate despite surging oil prices.

The BSP reported that the expansion of more than two-fold was due mainly to the surge and reversal of the "other capital" account in the FDI ledger which reversed to a surplus of $656 million from a net outflow of $107 million in the same period in 2005.

The "other capital" account is essentially comprised of inter-company borrowing/lending of funds between foreign direct investors and their local subsidiaries, branches or affiliates in the Philippines.

The BSP reported that the inter-company account transactions largely involved automotive and electronic firms.

The improvement in the "other capital" account more than offset the net outflow of $25 million in reinvested earnings in the first six months of the year, the BSP said in its report.

Major investors during the six-month period were US, Japan, United Kingdom, Federal Republic of Germany, Switzerland and Taiwan. The bulk of the infused capital placements were directed to the manufacturing (chemicals, health-care, electronics, airconditioning system and steel products); services (medical research, resort facilities, information/technology, engineering, construction and facilities management); financial intermediation and real estate sectors.