BSP records $61M net outflow of FDI in June

The Philippines suffered a net outflow of foreign direct investments in June as funds moved back to the United States due to its improving economy.

The Bangko Sentral ng Pilipinas reported Tuesday that FDI hit a net outflow of $61 million in June, a reversal from the net inflow of $307 million in the same month last year.

This development came amid reports that the US Federal Reserve may soon ease its stimulus program, which involves huge bond purchases, because of a gradually improving US economy.

An improving US economy gives foreign funds more reason to get money out of higher risk emerging nations such as the Philippines in favor of the traditional safe haven.

In the long run, however, the full recovery of the US economy would be beneficial for the Philippines and other emerging economies as the United States is one of the world’s biggest export markets and is home to a huge population of migrant workers.

The net outflow of FDI in June, however, was not enough to pull down first semester figures.

The BSP said the Philippines still managed to record a net FDI inflow of $2.19 billion in the first half, up by nearly 11 percent from $1.97 billion in the same period last year.

“This reflected the favorable sentiment of investors on the Philippine economy on the back of strong macroeconomic fundamentals,” the central bank said in a statement.

FDI in the first six months came mostly from investors from Mexico, Japan, the United States, and the British Virgin Islands, the BSP said.

The investments were made mostly in the utilities, financial services, entertainment and real estate sectors, it added.

Meantime, Socioeconomic Planning Secretary Arsenio Balisacan said that while the Philippines still lags behind its neighbors in terms of FDI, there was a good chance FDI will substantially rise over the medium term.

This is because of rising investments by local firms, he said.

Balisacan explained that sustained domestic investments should entice more foreigners to do business in the Philippines.

“Previously, even domestic investments were small. Now, investments by domestic firms are growing. Eventually this will help boost FDI,” Balisacan told reporters Tuesday.

Balisacan also said the Philippines had to sustain robust growth rates to make a dent into poverty figures.

A rapid growth sustained over the medium is also required for a country to witness a substantial rise in FDI.

“We should not expect a miracle to happen overnight. But if the high growth rates are sustained, we can see more FDI,” he said.

The Philippines has become one of the fastest-growing economies in Asia after its economy expanded by 6.8 percent last year and by 7.6 percent in the first semester of this year.

Last year’s economic growth breached the government’s target of 5 to 6 percent.

Growth in the first semester kept the economy poised to exceed the target of 6 to 7 percent for this year.