FOREIGN direct investments fell in October 2012 from the previous year despite the Philippines’ supposedly favorable macroeconomic fundamentals.
Data from the Bangko Sentral ng Pilipinas showed that the net inflow of FDI in October hit $38 million, down by 46 percent from $71 million in the same month the previous year.
Economists thus pushed the government to exert more effort to promote the country as an ideal investment haven, given the Philippines’ healthy growth rate, declining debt burden and increasing inflow of portfolio investments.
From January to October 2012, however, FDI did increase by 32 percent to $1.13 billion, from $853 million in the same period the previous year.
Gross inflows for the 10-month period reached 1.34 billion, up 6.8 percent from $1.26 billion. Outflows were recorded at $210 million.
The increase in investments in the first 10 months was not enough to make the Philippines significantly catch up with its neighbors. Indonesia, for instance, got nearly $6 billion in gross FDIs in the third quarter alone.
The BSP, however, said encouraging developments in the Philippine economy will help the country attract more foreign investors.
“The cumulative increase in FDI during the 10-month period reflected investors’ positive reaction to the country’s robust economic performance and the improved outlook following successive favorable credit rating actions by the Fitch Ratings, Standard & Poor’s (S&P), and Moody’s Investor Service in June, July and October 2012, respectively,” the central bank said.
Fitch kept its rating for the Philippines at one notch below investment grade. S&P and Moody’s raised their ratings for the country, both from two notches to just a notch below the investment status.
The credit watchdogs cited the healthy pace of growth, improving fiscal condition of the government, and rising foreign exchange reserves, among other factors, for their decisions.
Meantime, Deutsche Bank said the short-term outlook was positive for the Philippines’ ability to corner FDIs. The bank believes more investments will come in as the government pursues its infrastructure projects and as the economy maintains a healthy pace of growth.
“Dollar inflows to the Philippines have been strong, but one area where the country has underperformed is FDIs, which remain small. A larger chunk of money could come in as the Philippines become more attractive. This will also depend partly on infrastructure [development],” Sameer Goel, head for Asian rates and currency strategy at Deutsche Bank, said in a press briefing.
Goel said dollar inflows to the Philippines, which were largely accounted for by remittances and portfolio investments, may soon reflect a much larger share of FDIs.