LONG-TERM investments poured by foreign players into the country still have not recovered enough to enter the growth territory in September this year, the Bangko Sentral ng Pilipinas (BSP) reported on Tuesday.
Foreign direct investments (FDI) into the country were down 2.9 percent in September, to hit $582 million during the month.
The Central Bank attributed the decline mainly to lower investments in debt instruments. The decline could have been larger, the BSP said, were it not for the reversal of equity capital investments from net outflows to net inflows during the month.
FDI is the type of investment that is often more coveted, as it stays longer in the economy and creates job opportunities for locals. September is the sixth consecutive month that the Philippines saw a decline in its FDI.
Net investments in debt instruments—which consist mainly of intercompany borrowings and lending between foreign direct investors and their subsidiaries and affiliates in the Philippines—decreased by 36 percent to $395 million in September this year, from $618 million in the same month last year.
Meanwhile, nonresidents’ net equity capital investments posted a 182-percent growth to $96 million—from net equity capital withdrawals of $117 million—as placements increased by 79.5 percent from $69 million to $125 million, while withdrawals declined by 84.8 percent from $187 million to $28 million.
Earlier this year, UnionBank Economist Ruben Carlo Asuncion said the anxiety related to the pending Corporate Income Tax and Incentives Rationalization Act (Citira) may also be dragging down these investments.
“Further hurting the general investment perception is the uncertainty brought by how certain fiscal reforms, such as the Citira Bill, particularly the rationalization of the current fiscal incentives, and how it will come out in final form,” Asuncion said last month. “New investors and fresh investments are seen to be on hold, waiting for the eventual outcome from discussions on the pending law.”
The September development moved the FDI for the first nine months of the year to a net inflow of $5.1 billion, 36.9 percent lower than the $8.1-billion net inflows registered last year.
“The slowdown in inflows reflected the adverse effects of the prolonged trade disputes, which continued to affect global growth negatively and prompted foreign investors to hold off their investment plans in emerging markets including the Philippines, until the global growth outlook improves,” the BSP said.
The bulk of equity capital placements during the period emanated from Japan, the United States, Singapore, China and South Korea.
The industries that benefited from these capital infusions were financial and insurance, real estate and manufacturing.
Asuncion said there is still hope that FDI inflows to the country will snap its declining trend within the year, as the October progress in US-China trade tensions may provide a sliver of hope and a slight recovery of FDI inflows in the last months of 2019, as well as the further clarity about the fiscal reform efforts.
Image credits: Artist’s Rendering