Long-term foreign investments in the Philippines rose sharply in August to reach their highest monthly level for the year as multinationals pumped more cash into their local affiliates.
August’s increase in foreign direct investments (FDI) was indicative of sustained confidence in the Philippine economy, which has been one of the region’s top performers this year.
The increase lifted the country’s eight month FDIs above the long-term historical average. Compared to neighbors in the region, the Philippines remains an underperformer in terms of attracting foreign investments.
In August, net inflows of FDIs reached $526 million, the highest for any single month since December 2014, Bangko Sentral ng Pilipinas (BSP) data showed. This was an increase of 76.3 percent year-on-year.
“This is on account of the more than seven-fold increase in investments in debt instruments or inter-company borrowings from [multinationals] by subsidiaries or affiliates in the Philippines,” the BSP said in a statement.
The BSP said multinationals lent $431 million to local affiliates in August, up from last year’s $59 million. This increased lending was more than enough to offset a decline in foreign equity investments, which declined 81.2 percent to $45 million.
Equity capital placements came largely from the United States, Japan, Singapore, Taiwan and Ireland. This money went mainly to the manufacturing, real estate, wholesale and retail trade, and information technology (IT) sectors.
Profits reinvested by multinationals in the Philippines, which are also counted as FDIs, increased by 2.8 percent to $61 million.
As a result of August’s increase, year-to-date FDI net inflows reached $3 billion, down 27.1 percent from the same eight months in 2014.
The level of FDIs received every year is seen as an indicator of the economy’s overall health because foreign investors are more likely to make bets on countries that perform better.
Apart from showing the country’s attractiveness as a safe harbor for investors, FDIs also contribute directly to job generation.