August was another solid month for investments in the Philippines, which surged to more than double the 2013 level as foreign firms dug in for the long term, confident of the country’s prospects.
Data from the Bangko Sentral ng Pilipinas showed net inflows of foreign direct investments (FDI)—which are more permanent, job-generating bets in the country—rising for the eighth consecutive month this year.
The BSP, in a statement, said the country’s “sound macroeconomic prospects” remained the main draw for investors to set up shop in the Philippines.
Net inflows of FDIs rose to $299 million in August, more than double the $141 million recorded in the same month last year. For the eight months ending August, FDI net inflows reached $4.3 billion.
FDIs come in the form of significant buy-ins by foreign firms in local companies, and advances by multinationals to their local affiliates. Earnings of foreign firms operating in the Philippines that are kept in the country are also counted as FDIs.
The government considers FDI flows as more meaningful votes of confidence in the country’s economic health since this money is usually spent on the construction of new facilities or the acquisition of heavy equipment. This makes it harder for companies to divest.
In the meantime, foreign portfolio investments, or placements in local stocks and bonds that can easily be sold, are seen as quicker indicator for how investors view the country. Portfolio investments, however, are subject to the ebb and flow of financial markets. As a result, fundamentals are often overlooked by these investors.
By FDI component, net inflows of equity capital rose significantly (by 329.9 percent) to $180 million in August 2014 from $42 million in the same month last year.
This was due to the rise in equity capital placements (107.6 percent), coupled with the decline in equity capital withdrawals (by 83.7 percent).
Equity capital investments in August—which came mostly from the United States, Thailand, the Netherlands, Sweden and Singapore—were channeled mainly to financial and insurance; manufacturing; transportation and storage; real estate, and administrative and support services sectors.
In the second quarter of the year, the Philippines and Malaysia were tied as Southeast Asia’s fastest growing economies, both expanding by 6.4 percent.
The government remains confident of hitting its target for economic growth this year, set at 6.5 to 7.5 percent. Last year, the Philippine economy grew by 7.2 percent—the fastest in Southeast Asia.