FOREIGN direct investment (FDI) net inflows reached an all-time high of $10.5 billion in 2021 as the country benefits from positive investor sentiment due to anticipated economic recovery from pandemic, the Bangko Sentral ng Pilipinas (BSP) reported on Thursday.
In a statement, the Central Bank said FDI net inflows grew by 54.2 percent to $10.5 billion last year from $6.8 billion in 2020.
The latest figure surpassed the previous high of $10.3 billion in 2017.
“The growth in FDI reflected continued positive foreign investor sentiment on the country amid expectations of a rebound in domestic economic activity and declining Covid-19 reported cases, as well as the strengthening of the global economy,” BSP explained.
FDI are investments made by foreign players in the Philippines in the hopes of long-term return. As such, they are expected to generate job opportunities and have a multiplier effect on the economy.
The BSP attributed the better FDI net inflows to higher non-residents’ net investments in debt instruments, which grew by 80.4 percent to $7.5 billion from $4.2 billion year-on-year.
This, as reinvestment of earnings rose by 34.7 percent to $1.3 billion in 2021 from $944 million in the previous year.
Non-residents’ net investments in equity capital, other than reinvestment earnings, were slightly up by 0.7 pecent to $1.7 billion.
The Central Bank noted that equity capital placements reached $2.1 billion while withdrawals amounted to $399 million for the year. Most of the equity capital placements came from Singapore, Japan, United States and Netherlands.
In December 2021 alone, FDI net inflows increased by 59 percent to $1.1 billion from $671 million in the same month the previous year.
The 60-percent improvement in non-residents’ net investments in debt instruments supported the FDI net inflows growth for the period.
Non-residents’ net investments in equity capital, other than reinvestment of earnings, rose by 59.6 percent to $336 million in December 2021 from $211 million year-on-year.
Reinvestment of earnings saw 50.3-percent growth at $96 million in December last year.
‘Strong positive signal’
RCBC Chief Economist Michael Ricafort said the new record high for FDI net inflows signals a “strong positive signal for the economy and defying the pandemic, in terms of creation of more jobs/employment and other business/economic opportunities in view of increased foreign investments into the country.”
“Thus, FDIs remain one of the bright spots and one of the major pillars of the economic recovery program from Covid-19 for the Philippine economy, in view of their continued double-digit growth rates in recent months,” he added.
Ricafort explained that the recent easing of quarantine measures—seen to result in more business activities and revenue generation—can bode well for the country in terms of attracting FDI.
The further reopening of the economy can help offset the adverse impact of the Ukraine-Russia conflict on the economy, he said. The escalating tensions in the said countries have led to surging fuel prices that can pressure inflation.
Still, Ricafort cited the need to monitor developments in Eastern Europe as such will potentially further affect the supply chains.
“However, an offsetting risk factor for FDI is any increase in new Covid-19 cases locally and worldwide, and also amid lingering concerns over the Omicron variant that led to some restrictions on travel/flights/mobility, which could slow down economic recovery prospects and further growth in FDI,” the economist added.
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