BSP: PH will continue to draw foreign investors

The Philippines is expected to remain an attractive investment destination in the next 12 months as the economy may continue to outperform its neighbors in the region, according to the Bangko Sentral ng Pilipinas (BSP).

In the near term, foreign investors may leave the country because of the US Federal Reserve’s decision to taper its bond-buying program starting January.

But once the dust settles, investors will want to focus on the fundamentals of certain countries. This is where the Philippines will stand out, BSP Governor Amando M. Tetangco Jr. said.

“This would reflect sustained confidence of foreign investors in the Philippine economy,” Tetangco said in a recent interview.

This year, foreign portfolio investments, or placements in local stocks and debt securities, are expected to dip to $3.2 billion from last year’s net inflow of $3.91 billion.

By next year, these investments, which are referred to as “hot” money flows due to the speed of their entry and exit, may decline further to $2.1 billion.

Tetangco said the lower level of hot money investments would be a result of adjustments to be made by fund managers, who are seen to favor emerging markets like the Philippines less due to the improvement of conditions in the United States and other developed economies.

Foreign direct investments (FDI), meanwhile, are also expected to improve this year to $2.1 billion from $1.3 billion in 2012. By next year, direct investments, which accounts for money spent by foreign companies to set up or expand operations in the Philippines, may rise to $2.6 billion.

“Hot” money flows serve as an indicator of the country’s attractiveness in the short term, while FDIs are considered riskier investments for non-residents and are therefore seen to more permanent bets on the expected performance of the domestic economy.

The Philippines was the best-performing market in Southeast Asia in the third quarter, growing by an average of 7.4 percent. Despite the damage done on the country by recent natural calamities, the economy is still expected to grow and may hit the top end of the government’s target range of 6 to 7 percent.