LONG-TERM investments made by foreign investors to the Philippines started the year in decline due to investor concerns on the resurgence of Covid-19 cases in the country.
The Bangko Sentral ng Pilipinas (BSP) reported that foreign direct investments (FDI) to the country hit a net inflow of $819 million in January, declining by 16 percent from the $975 million net inflows posted in the same month last year.
FDI are investments made by foreign players to the Philippines in hopes of long-term return.
Since these are in the country for a longer term compared to their short-term counterpart, the foreign portfolio investments (FPI), FDI usually create jobs for Filipinos and have a multiplier effect on the economy.
In a statement, the BSP attributed the decline in FDI net inflows to the 68.2-percent contraction in equity capital placements to $118 million from $370 million in the same month last year.
“This may be due largely to investor concerns following the resurgence of cases of the highly transmissible Omicron Covid-19 variant in the country and the re-imposition of stricter quarantine measures in early January 2022,” the BSP said.
Broken down, equity capital placements originated mostly from Japan, the United States, the Netherlands, and Malaysia.
Capital infusions were channeled mainly to the manufacturing; financial and insurance; and real estate industries.
Meanwhile, reinvestment of earnings was largely stable at $78 million from $79 million a year ago.
On the other hand, non-residents’ net investments in debt instruments increased by 18.3 percent to $634 million from $536 million in January 2021, as inflows were infused to local affiliates to finance their operational requirements.
Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort shrugged off the decline, saying the month’s inflow is still one of the highest during the pandemic.
The economist said the dip in FDI was due to the restrictions and the figures will likely bounce back in the March data—when restrictions were already lifted in the country.
“FDI remain one of the bright spots and one of the major pillars of the economic recovery program from Covid-19 for the Philippine economy, still among the highest since the pandemic started in recent months, alongside the near record highs in exports, OFW remittances, imports [but could have been bloated by elevated prices of oil and other imported global commodities], as well as local manufacturing gauge among pre-pandemic highs and unemployment rate at the lowest since the pandemic started, as the economy re-opens further from the lockdowns earlier in 2021,” Ricafort said.