FDI inflows up 16.4% to $779 M in H1

MANILA, Philippines – Foreign direct investments (FDI) grew 16.4 percent in the first half of the year on the back of favorable investor sentiment, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

BSP Governor Amando M.Tetangco Jr. said in a statement that FDI inflows reached $779 million from January to June this year or $110 million higher than the $669 million inflows booked in the same period last year.

“The respectable growth in FDI reflected favorable investor sentiment as the country’s macroeconomic fundamentals remained strong, amid a backdrop of a moderating and uneven global economic outlook,” Tetangco said.

Equity placements fell 17 percent to $244 million in the first semester of the year from $294 million in the same period last year. At the same time, equity withdrawals plunged 72.9 percent to $51 million from $188 million.

Tetangco said the bulk of the investments came from the US, Japan, Hong Kong, Singapore, and the Netherlands and were largely placed in real estate, manufacturing, mining and quarrying, financial services and insurance activities, utilities as well as wholesale and retail trade sectors.

Data showed that the net inflow of other capital account consisting largely of intercompany borrowing between foreign direct investors and their subsidiaries or affiliates in the Philippines went up by 9.7 percent to $363 million in the first semester from from $331 million in the same period last year due to higher trade credits extended to local subsidiaries by their parent companies abroad.

On the other hand, reinvested earnings retreated by 3.9 percent to $223 million from $232 million, representing the return on foreign direct investors’ investments that were subsequently retained in the domestic economy.

For of June alone, Tetangco said net FDI inflows increased by 28 percent to $64 million from $55 million in the same month last year.

“This developed as positive balances were recorded across all the major FDI categories during the month in review,” Tetangco stressed.

He said equity withdrawals jumped 225 percent to $13 million in June from $4 million in the same month last year while equity placements fell 48.4 percent to $33 million from $64 million.

Likewise, reinvested earnings jumped 150 percent to $25 million from $10 million while other capital surged 195 percent to $19 million from a net outflow of $20 million.

The Cabinet-level Development Budget Coordination Committee (DBCC) has set a GDP growth target of between seven percent and eight percent this year but is now looking at a lower growth of between five percent and six percent.

The National Statistical Coordination Board (NSCB) reported earlier that the growth of the country’s domestic output eased to 3.4 percent in the second quarter of the year from 8.9 percent in the same quarter last year due to the surge in world oil prices, the prolonged weakness of the global economy, the political unrests in the Middle East and North African (MENA) region, and the disasters in Japan.

The GDP growth in the second quarter was also slower than the revised 4.6 percent booked in the first quarter of the year. This brought to four percent the GDP growth in the first half of the year from 8.7 percent in the first semester last year.

The National Economic and Development Authority (NEDA) expected the country’s GDP to grow between 4.5 percent and 5.5 percent in the second quarter while the BSP projected the GDP in the second quarter to grow faster than the first quarter of the year.

Due to the lower- than-expected economic growth in the second quarter of the year as well as the benign inflation outlook amid stable oil and food prices in the world market, the BSP’s Monetary Board kept interest rates steady for the third consecutive policy rate-setting meeting last Sept. 8.

The BSP decided to keep its overnight borrowing rate unchnaged at 4.50 percent and its ovenight lending rate at 6.50 percent and at the same time maintain the reserve requirement ratio for banks at 21 percent.

The BSP raised interest rates by 25 basis points last March 24 and by another 25 basis points last May 5 as a preemptive move to keep inflation expectations well anchored amid the escalating price of oil in the world market.

The policy rate setting body, however, kept interest rates steady last June 16 and July 28 but raised the reserve requirement ratio for banks by a cumulative 200 basis points to 21 percent from 19 percent to siphon off P70 billion from the financial system and curb additional inflationary pressures arising from excess liquidity brought about by strong inflow of foreign capital. –Lawrence Agcaoili (The Philippine Star)