MANILA, Philippines—The central bank, Bangko Sentral ng Pilipinas (BSP), expects net foreign portfolio investments—in stocks, bonds and bank products—to drop by about 68 percent to $1.1 billion this year because of the continuing turbulence in the global financial environment, a BSP official said Thursday.

Of net foreign direct investments (FDI), the BSP expects $2.6 billion, not far from the $2.7 billion that came in last year, on sustained investor interest in key sectors like mining, businesses process outsourcing, power and manufacturing, BSP managing director Cyd Amador said at a news briefing.

“We’re thinking it could be a tougher year not only because financing conditions are tight but [also] because there’s a global credit squeeze, and that will impact on the level of non-resident foreign direct investments,” Amador said.

Amador said the “very cautious” attitude of investors would cause a slowdown in portfolio inflows this year.

The Philippines last year was among the top 10 recipients of foreign portfolio investments among emerging markets across the globe, capturing $3.5 billion.

“But one bright spot is that the outlook on the US economy has been revised, not significantly, but revised upward nevertheless,” Amador said.

She noted that the International Monetary Fund was now looking at a US economic growth of 1.1 percent. “The slump in the US economy should be shallower than anticipated,” she said.

BSP director Iluminada Sicat said the manufacturing sub-sectors that would likely benefit from FDI inflows this year will be producers of beverages motorcycles, glass, and electronics.

Sicat said the BSP projection of foreign portfolio inflows assumed the government later this year would float $500 million worth of global bonds and private corporations such as Filinvest Development Corp. would make public stock offerings.

The slowdown in projected foreign investments, along with outflows such as for debt payments, could result in a deficit of $400 million in the capital and financial account in the country’s balance of payments this year, according to the BSP projections.

However, the current account is expected to show a surplus of $4.1 billion, as robust foreign exchange remittances from overseas Filipino workers (OFWs) may offset an expansion in the trade deficit. The trade deficit is projected at $11.5 billion, and OFW remittances at $16.5 billion.

The BSP therefore expects a surplus of $2.5 billion in the balance of payments this year, compared with an earlier forecast of $3.4 billion. Edited by INQUIRER.net