FDIs jump 44% to $7.3 billion in 9 months, break target

by Lawrence Agcaoili – The Philippine Star, 11 Dec 2021

MANILA, Philippines — The net inflow of foreign direct investments (FDIs) expanded for a fourth straight month in September, prompting the Bangko Sentral ng Pilipinas (BSP) to raise its 2021 target to $8 billion.

BSP Governor Benjamin Diokno said the cumulative FDI net inflows amounted to $7.29 billion from January to September, a 43.8 percent expansion from last year’s $5.07 billion, as multinational companies continued to inject more money into their affiliates in the Philippines amid the gradual recovery from the pandemic-induced recession.

Due to intermittent lockdowns amid the resurgence of COVID cases, the BSP lowered in September its 2021 net FDI inflow target to $7 billion from the original target of $7.5 billion and to $7.5 billion instead of $8.5 billion for 2022.

However, the Monetary Board last Thursday raised the FDI target to $8 billion for this year and to $8.5 billion for next year.

Data showed the infusion by foreign direct investors to their subsidiaries in the country in the form of net investments in debt instruments surged by 78.6 percent to $5.3 billion during the nine-month period from $2.97 billion a year ago.

Likewise, reinvestment of earnings went up by 12.3 percent to $865 million from $770 million.

On the other hand, equity placements coming mainly from Singapore, Japan, the US and the Netherlands, which were infused into manufacturing; financial and insurance; electricity, gas, steam and air-conditioning as well as real estate slipped more than eight percent to $1.46 billion during the nine-month period from last year’s $1.59 billion.

Meanwhile, equity withdrawals increased by 30.7 percent to $865 million from $770 million.

For September alone, Diokno said FDI net inflows increased by 30.4 percent to $660 million from $506 million in the same period last year as equity placements fell by 22.3 percent to $88 million from $114 million, while withdrawals surged by 269 percent to $56 million from $15 million.

The BSP chief said equity capital placements during the month came largely from Japan, the United States, Hong Kong, Indonesia and Singapore. These equity placements were channeled to the manufacturing, real estate, professional, scientific and technical and construction industries.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said FDIs remain one of the bright spots for the Philippine economy, alongside the near record highs in exports, imports, remittances from overseas Filipino workers (OFWs) as well as factory activity.

Ricafort said a de facto reopening of the economy with the shift toward granular lockdowns and the further easing of the COVID Alert Level to 2, which allowed more businesses to either reopen or further increase production capacity, would increase business and economic activities toward greater normalcy and led to some pick-up in FDI.

Likewise, he said the near-record-low interest rates would also encourage more FDI, which create more jobs and other business activities in the country.