MANILA, Philippines - Foreign direct investments (FDI) reached a mere $16 million in February this year, falling by 82 percent from last year’s $90 million, bringing the two-month total 75.2-percent lower at $29 million compared with $117 million in 2008.
Direct investments from abroad have been plummeting unabated since 2008, a stark contrast with the $1.418-billion level recorded over the same two-month period in 2007.
The February inflow was only $4 million more than the $12-million gross winnings of Manny “Pacman” Paquiao, the country’s latest boxing hero, and only a small fraction of the February 2008 inflow.
Data from the Bangko Sentral ng Pilipinas (BSP) showed that despite the dramatic decline, the inflow was an indication of resilience considering that the global economy was itself receding.
The BSP reported that net equity capital inflows in January-February 2009 amounted to $64 million, about half the level posted a year ago. These flows were directed largely into the real estate, financial intermediation and trade/commerce sectors.
But the BSP said there was an increase in reinvested earnings totaling $28 million — reversing the net outflow that was recorded over the same period in 2008.
By contrast, the Other Capital account reversed to a net outflow of $63 million. This account consists largely of intercompany borrowing and lending between foreign direct investors and their subsidiaries and affiliates in the Philippines.
The BSP said the outflow in the first two months of the year was due mainly to intercompany loan payments by local subsidiaries/affiliates to their parent companies abroad and transfer of profits by local branches of foreign banks to their head offices abroad.
Foreign direct investments would fall to $700 million this year as investors hold back their plans to invest in the Philippines in the midst of the global economic recession.
Last year, foreign direct investments amounted to $1.4 billion, indicating that this year’s level would be half of the foreign direct investments that trickled in, going mostly to power and telecommunications.
The BSP announced earlier that it expected foreign direct investments to weaken significantly but inflows would remain positive.
The BSP said fears of a dramatic economic decline had the same effect in the financial market but this year, monetary officials were expecting portfolio investments to recover from last year’s $3.7-billion outflow to a $600-million inflow for the whole year.
Deputy governor Diwa Guinigundo said the BSP was making a “conservative” projection for this year, counting only foreign direct investments that were already in the pipeline and scheduled to come in this year.
According to Guinigundo, FDI inflows were expected to go into power and telecommunications although some inflows were also expected to go into mining and quarrying, even some agricultural businesses.
Guinigundo said the latest projections had been factored in to the projected gross international reserves level of $38 billion for 2009 and the balance of payments level of $700 million.
According to Cyd Amador, managing director of the BSP’s Monetary Stability Sector, the BSP would normally count pending applications in the various investment agencies.
“This time, because we know that risk aversion is pretty strong, we didn’t do that,” Amador said.