FDIs soar 60% in June, highest in five months

by Lawrence Agcaoili – The Philippine Star, 11 Sep 2021

MANILA, Philippines — The net inflow of foreign direct investments (FDIs) soared by 60.4 percent to hit a five-month high in June as more multinational companies pumped in additional money to their affiliates in the Philippines amid the pandemic, according to the Bangko Sentral ng Pilipinas.

BSP Governor Benjamin Diokno said net FDI inflow rose to $833 million in June from $519 million in the same period last year, mainly on account of infusion by foreign direct investors to their subsidiaries in the country in the form of net investments in debt instruments.

This was the highest net inflow since the $961 million recorded in January.

Non-residents’ net investment in debt instruments, consisting mainly of loans extended by parent companies abroad to their local affiliates, jumped by nearly 152 percent to $630 million in June from $250 million a year ago.

Likewise, reinvestment of earnings went up by more than 23 percent to $110 million in June from $89 million in the same month last year.

The strong inflows were enough to offset the 48 percent drop in equity other than reinvestment of earnings, to $93 million in June from $180 million a year earlier, as more foreign investors pulled out from the equities market amid the resurgence of COVID cases with the emergence of the highly transmissible Delta variant.

“Concerns over the spread of more transmissible Delta variant may have prompted investors to remain on the sidelines,” Diokno said.

The BSP chief said equity capital placements mostly coming from Japan, the US and Singapore – which were invested in manufacturing, real estate as well as financial and insurance industries – fell by 38 percent to $119 million in June from $192 million in the same month last year.

On the other hand, Diokno said equity capital withdrawals more than doubled to $26 million in June from $12 million a year ago.

From January to June, the net inflow of FDIs jumped by 40.7 percent to $4.3 billion from $3.05 billion in the same period last year on the back of the 86.5 percent surge in investments in debt instruments to $2.8 billion from $1.5 billion.

Likewise, reinvestment of earnings inched up by 7.7 percent to $522 million from $484 million.

Equity placements coming from Singapore, Japan and the US, invested in manufacturing, financial and services as well as electricity, gas, steam and airconditioning industries, booked a 10.4 percent decline to $1.14 billion from January to June compared to $1.27 billion in the same period last year.

Withdrawals also slipped by 18.3 percent to $165 million from $202 million.

As the Philippines starts to recover from the pandemic-induced recession, the BSP sees net FDI inflow bouncing back to $7.5 billion this year and $8.5 billion next year.

Rizal Commercial Banking Corp. chief economist Michael Ricafort said FDIs still sharply picked up after reaching the pandemic low of $320 million in April last year, reflecting the height of the hard lockdowns locally and in many countries, alongside bottlenecks or disruptions in the global supply chain and logistics.

Ricafort said the pickup in FDIs in recent months may also reflect some normalization of supply chains and logistics locally and worldwide as economies further re-open, thereby allowing more FDIs to flow into the country.

The economist also said increased infrastructure spending under the government’s massive infrastructure program before the election ban kicks in as well as the timely approval of the 2022 national budget could also help attract more FDIs into the country.