The country’s net foreign direct investment (FDI) plunged to its lowest level in 41 months, according to the September 2023 data released by the Bangko Sentral ng Pilipinas (BSP) on Monday.
The data showed total net FDI inflows amounted to $422 million in September 2023, the lowest since the $314 million posted at the height of Covid lockdown in April 2020.
BSP said the net FDI inflows represented a contraction of 42.2 percent from the $731 million posted in September 2022 and a decline of 46.58 percent from the $790 million posted in August 2023.
“The continued slowdown in net FDIs may be attributed to still higher US/global/local interest rates since 2022 that raised borrowing/funding costs, which weighed on demand for new investments, including FDIs,” Rizal Commercial Banking Corporation (RCBC) Chief Economist Michael L. Ricafort said in the Hexagon Perspective brief.
For the three quarters of 2023, BSP said FDI net inflows reached $5.9 billion, 15.9 percent lower than the $7-billion net inflows recorded in the comparable period last year.
“FDI declined on the back of persistent global economic uncertainties, which continued to affect investor decisions,” BSP said.
The President and the Economic Team have been conducting roadshows to market the Philippines as an investment destination of choice to investors here and abroad since last year.
The country’s glowing economic prospects were communicated to global investors such as those from the United States, Canada, and Europe. On Monday, the last Philippine Economic Briefing (PEB) was conducted in Iloilo.
These roadshows, Ricafort said, may have propped up FDIs in previous months, when asked about the impact of the government’s initiative.
“One data point pa lang naman ay ‘yung softness, wait-and-see kung masundan because data in earlier months is still relatively stronger,” he added.
Jonathan L. Ravelas, senior adviser at professional services firm Reyes Tacandong & Co., told the BusinessMirror that poor FDI performance indicates a lag in terms of the arrival of investments.
Ravelas said the uncertain economic landscape worldwide may also be blamed for the contraction in FDIs as well as high inflation.
“Lag time is usually the issue. Three stages: Pledged, Committed and Actual. All dependent on current environment,” Unionbank Chief Economist Ruben Carlo Asuncion also told BusinessMirror.
“Let’s face it. These investors can always go elsewhere. It’s also is a tough environment for investments now. Our hope is that it will materialize,” he added.
BSP said nonresidents’ net investments in debt instruments declined by 47.8 percent to $238 million from $456 million in September 2022.
Further, nonresidents’ net investments in equity capital (other than reinvestment of earnings) went down by 43.9 percent to $105 million from $187 million. The data also showed that and their reinvestment of earnings contracted 9.9 percent to $79 million from $87 million.
BSP said nonresidents’ equity capital placements in the country during the reference month came mostly from Japan, Singapore, and the United States.
These were invested largely in the financial and insurance industry which accounted for 35 percent; construction, 29 percent; and manufacturing, 22 percent.
In January to September, BSP said manufacturing accounted for 50 percent of FDIs followed by others at 24 percent and real estate at 14 percent.
The BSP statistics on FDI are compiled based on the Balance of Payments and International Investment Position Manual, 6th Edition (BPM6).
FDI includes investment by a nonresident direct investor in a resident enterprise, whose equity capital in the latter is at least 10 percent.
It also includes investments made by a nonresident subsidiary/associate in its resident direct investor. FDI can be in the form of equity capital, reinvestment of earnings, and borrowings.
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