PH investment grade bolstered FDI inflow in February

Foreign direct investments surged in February, reversing the contraction recorded the previous month, as the country succeeded in attracting more foreign enterprises to do business here.

The Bangko Sentral ng Pilipinas on Friday reported that the net inflow of foreign direct investments amounted to $436 million in February—up by 127 percent from the $192 million posted in the same month of 2012.

“The FDIs reflect investors’ increasing optimism over the country’s growth potential, notwithstanding the uncertainties on the strength of the global economy,” the BSP said in the report. “The increase in FDIs also is an indication of improved investment climate on the back of sound macroeconomic fundamentals.”

With the inflows in February, investments in the first two months of the year totaled $1.01 billion—down by nearly 19 percent from the $1.25 billion reported in the same period last year.

The contraction was brought on by the weak FDI performance in January. Monetary officials attributed it to problems now affecting the global economy, particularly the ongoing crisis in the euro zone.

Citing the net FDIs of the first two months, the BSP said that the country was well on its way to attaining the full-year target of $2 billion.

But this projection is now being reviewed due to the recent investment grade assigned to the country by major credit agencies.

Monetary officials said the investment grade could further bolster the inflow of FDIs.

On March 27, Fitch Ratings upgraded the Philippines’ credit standing by a notch from BB+ to BBB-, which is the minimum investment grade.

On May 2, Standard & Poor’s made a similar move, giving the country its second investment grade.

The Philippines currently lags behind most of its Southeast Asian neighbors in terms of attracting FDIs. Nonetheless, government economic officials said the Philippines could start catching up following the improvement in the country’s credit rating.

Most foreign fund managers are only able to do business in countries with investment grade, they said. But the improvement in the Philippines’ credit rating will serve to open doors for FDIs to pour into the country.

According to economists from the private sector and multilateral agencies, the country direly needs more investments to generate more jobs and make the country’s economic growth meaningful not only for the middle class and the rich, but for the poor as well.