FDI inflows slow further in Oct

For 2nd consecutive month

MANILA, Philippines – Foreign direct investments (FDI) in the Philippines went down for the second month in a row in October, but the 10-month tally still managed to grow despite uncertainties brought about by external shocks.

The Bangko Sentral ng Pilipinas (BSP) reported yesterday FDI inflows declined 14.3 percent to $342 million in October last year from $399 million in the same month in 2015. Inflows were also down nearly 70 percent to $469 million in September last year from $1.530 billion in the same period in 2015.

Data showed equity placements went up 35.8 percent to $84 million in October  from $62 million while withdrawals jumped 218.1 percent to $24 million from $8 million.

The central bank said equity placements came mostly from Germany, Taiwan, US, the Netherlands, and Cayman Islands. The funds were infused in financial and insurance; manufacturing; real estate; construction; as well as accommodation and food service activities.

“Investment inflows continued amid investors’ confidence in the resilience of the economy, backed by sound macroeconomic fundamentals,” the BSP said.

For the first 10 months of 2016, the BSP said FDI inflows grew 22.2 percent to $6.22 billion from $5.09 billion in the same period in 2015.

Statistics showed the growth rate of net FDI inflows has declined steadily after peaking at 184 percent in April as the Bank of Tokyo – Mitsubishi UFJ Ltd pumped in P37 billion in fresh equity to Security Bank in exchange for a 20 percent stake.

The growth rate has steadily slowed down to 136 percent in May, 95 percent in June, 79 percent in July, 71 percent in August, 25.3 percent in September, and finally to 22.2 percent in October due to the volatility in global financial markets.

Global financial markets remained volatile due to the uncertainty about the timing of the rate increase by the US Federal Reserve, while investors adopted a wait-and-see attitude in the Philippines due to the May elections.

Aside from uncertainties about the timing of the US interest rate hike, investor confidence slipped in October amid the shift to independent foreign policy by the Duterte administration. Negative impact of the Davao bombing as well as the tirades made by President Duterte against detractors including US President Barack Obama, UN secretary general Ban Ki-moon, and the European Union was carried over to October.

Equity placements declined 16.3 percent to $1.95 billion in the first 10 months of last year from $2.33 billion in the same period in 2015 while withdrawals fell 65.8 percent to $272 million from $795 million.

The central bank sees FDI inflows improving to $7 billion this year from the projected $6.7 billion last year as the Duterte administration committed to ramp up infrastructure spending to five percent of GDP.