Net FDI inflows rise 11% to $917 M in H1

MANILA, Philippines – Lured by the Philippines’ sound macroeconomic fundamentals, foreign direct investments (FDI) that entered the country in the first semester already accounted for more than three-fourths of the official forecast for the year.

According to the Bangko Sentral ng Pilipinas (BSP), net FDI reached $73 million in June, 15.9 percent higher than the previous year’s $63 million.

This brought the year-to-date tally to a net inflow of $917 million, a 10.6-percent improvement from last year’s level and accounts for 76 percent of the $1.2-billion target for the year.

A net inflow means more foreign investments entered the country than left.

“Investor sentiment was buoyed by the country’s sound macroeconomic fundamentals, such as the subdued inflation environment, strong fiscal performance, and favorable external payments position,” the central bank said.    

Net equity capital or investments continued to account for the bulk of the FDI. BSP said these investments, usually parent companies’ infusion in their local counterparts, rose by almost three-fold to $78 billion in June largely due to a single equity placement of a “foreign firm in its domestic holding company.”

As of the first semester, net equity inflows ballooned to $1.07 billion from $280 million last year. 

Reinvested earnings, on the other hand, inched down to $23 million in June. This caused its six-month figure to plummet 57 percent to $74 million from $172 million.

Other capital accounts- consisting largely of borrowing among foreign companies and their offices here- worsened its performance from last year. Data showed these investments dropped to a net outflow of $28 million against last year’s $10-million deficit.

This was the six consecutive month this indicator was in the negative territory, which BSP said was “due to the settlement of trade credits extended to local companies by their foreign affiliates” and the availment of trade credits by these firms.

BSP said the bulk of investments came from the Netherlands, United States, Japan, Germany and Singapore. These were mostly channeled in the following sectors: manufacturing, real estate, mining and quarrying, wholesale and retail trade, and accommodation and food service activities.

FDI is part of the country’s balance of payments (BOP), which measures the country’s capacity to service its debts and meet its external obligations.

In June, BSP revised its forecasts for FDI and BOP. It now expects the country to book $1.2 billion in FDI inflows from $2 billion initially. BOP projections were likewise lowered to $2.6 billion in surplus from $2.8 billion.

A review of all BOP accounts-including remittances from overseas Filipinos, export earnings and portfolio investments-is underway in the fourth quarter, BSP Deputy Governor Diwa Guinigundo said in a text message.