5-month net FDI inflows down 42%

The Philippines again proved an attractive destination for long-term foreign investors in May, reflecting the country’s bright economic prospects amid wobbly global growth. Figures for the first five months, however, were disappointing.

Documents from the Bangko Sentral ng Pilipinas (BSP) showed that net inflows of foreign direct investments (FDI) were recorded in May. It was the 23rd consecutive month the country posted net FDI inflows.

FDIs are long-term investments in the Philippines made by foreign firms. These come in the form of significant equity investments in local firms, lending by multinationals to their Philippine affiliates and subsidiaries, and earnings reinvested by multinationals operating in the country.

A net inflow means more money came in than went out during the month. Although investments were positive in May, the level was lower than the net inflows recorded in the same month last year.

In May, FDI net inflows reached $403 million, higher than April’s $382 million. Year-on-year, FDIs were down 6.8 percent. FDIs have been positive since July 2013.

For the five months ending May, FDI net inflows stood at $1.6 billion, down nearly 42 percent year-on-year. Last year’s full-year FDI net inflows reached a record high $6.2 billion.

Direct investments usually bankroll the construction of new facilities or the expansion of foreign firms’ new or existing operations in the country. These are considered a better barometer for the confidence of international investors in the country because these placements tie them to the economy’s fortunes for the long term.