High FDI level sustainable – BSP

MANILA, Philippines - The Bangko Sentral ng Pilipinas sees no reason why the high level of foreign direct investments in January would not be sustained throughout the year, an official said yesterday.

“The momentum can be sustained... I don’t see any reason why not,” central bank Deputy Governor Diwa C. Guinigundo told reporters.

“For January, that was actually one of those challenging times when we experienced portfolio outflows because of the US Fed’s action, but nonetheless the more durable and more permanent type of investments came in,” he continued.

Net FDI inflows summed up to $1.027 billion in January, its highest level in two years, latest BSP data showed.

It was primarily driven by foreign companies lending to their local affiliates to finance operations and the expansion of their firms in the Philippines.

“Moving forward, we believe that the economy will continue to grow and many of the macroeconomic stories will be the same, if not improved over time,” Guinigundo pointed out.

“So we expect that the same confidence will be maintained and our foreign direct investors will continue to come in,” he added.

The BSP has forecast net FDI inflows to reach $2.6 billion this year, 33 percent below the actual $3.86 billion recorded in 2013.

The lower net inflow projection was due to the US Federal Reserve’s scaling back of asset purchases, which has prompted investors to move back to advanced economies from emerging markets in anticipation of an increase in US interest rates.

The Fed has already made a total of $30-billion reduction on its stimulus during three consecutive meetings, bringing the current figure to $55 billion.

The US central bank’s action has heightened volatility in global financial markets because when the stimulus is fully taken out, such will lead to higher interest rates.

The BSP, however, has always reiterated the country’s robust economic performance would differentiate it from other emerging markets investors are fleeing from and attract more investments to further drive growth.

The Philippine economy grew 7.2 percent last year, while inflation settled at three percent, which was at the low-end of the BSP’s target range.

“We have a lot to offer. We have improved our efficiency gains, productivity gains, and we even have a good labor compliment,” Guinigundo said.