FOREIGN investors continued to show optimism in the Philippine economy’s long-term potential, as foreign direct investments (FDI) rose double-digit in the first quarter of this year.
The Bangko Sentral ng Pilipinas (BSP) on Monday reported a 43.5-percent rise in the aggregate FDI for the first three months of the year, owing largely to what the Central Bank dubbed as “investors’ continued positive outlook on the Philippine economy on the back of sound macroeconomic fundamentals and robust growth prospects.”
The growth in FDI in the first quarter of 2018 resulted in a net inflow of $2.2 billion, higher than the $1.5 billion seen in the same period last year.
FDI is the type of investment that is often more coveted, as it stays longer in the economy and creates job opportunities for locals. It is also not easily pulled out of the market unlike its shorter-term counter part, the foreign portfolio investments.
From the start of the year, optimism has been high for the country’s FDI, as experts earlier said global players are likely to put their money in one of the fastest-growing economies in the region.
Just recently, the International Monetary Fund (IMF) expressed its optimism on the country’s ability to raise its FDI over the near to medium term, citing strong domestic reform momentum in the areas of taxation and capital market development.
ING Bank Manila Senior Economist Joey Cuyegkeng also earlier said chances remain high that the Philippines will reach the government’s year-end projection as foreign direct investors are “eager to participate in one of the fastest-growing economies in Asia.”
For 2018 the BSP projected $8.2 billion in FDI net inflows. This means that the country must at least be able to attract about $2 billion in FDI per quarter in the next nine months of the year.
Caution on 2nd package
Standard & Poor’s Global Ratings (S&P), meanwhile, warned in its most recent web cast that the uncertainty around the second tax-reform package could bring down the country’s FDI down in the near term, as investors adapt a wait-and-see stance as to what form the tax agenda package two is going to take.
The experts, however, said the tax reform is a “painful” but needed step to boost the country’s productive capacity for the economy to be able to sustain the kind of growth rate it currently has.
In March alone, FDI recorded a 27-percent rise to hit $682 million, from the $537 million seen in the same month last year.
This was driven by a significant increase in the investors’ net equity capital placements during the month from $51 million in 2017 to $351 million in March this year.
According to the BSP, these equity capital infusions came mostly from investors in Singapore, Hong Kong, Japan, the United States and Sweden.
Meanwhile, reinvestment of earnings also increased by 12.6 percent to $63 million in March 2018, from the $56 million in March 2017.
The increases in these two subsections were more than enough to offset the decline in the foreign players’ investments in debt instruments, as seen in the so called intracompany borrowings. This subsection declined by 36.1 percent to hit $301 million during the month.