The worsening debt crisis in Europe took its toll on the Philippine economy as the country posted a sharp decline in the flow of foreign portfolio investments in September compared to that of the same period last year.
According to the Bangko Sentral ng Pilipinas (BSP), it was the first month in over a year that net inflows of foreign portfolio investments had registered a drop.
“The decline reflects the bearish sentiments of the market with the continuing debt crisis in the Euro zone,” the BSP said, adding that although global financial markets had been shaken to the core, the domestic economy remained healthy.
Net inflows of so-called “hot money” to the Philippines amounted to $149.68 million in September—about 70 percent lower than the $494 million reported in the same month last year, the BSP said in a statement.
The September figure was also 62 percent lower than the $394 million registered in August.
Still, from January to September, the flow of foreign portfolio investments to the country was still higher than that of the same period last year. Net inflows at the time amounted to $3.21 billio—more than double the $1.4 billion registered in the same period last year.
Beginning late 2010, investors have been turning to the Philippines and other emerging markets in Asia, believing that they could park their funds in the region and earn in relative safety.
But investors’ sentiment recently shifted due to the prolonged debt crisis in the Euro zone.
Portfolio fund managers are now too spooked by the crisis in Europe that they have started to withdraw their investments from emerging markets.
Local market players said this development led to the sharp decline in hot money inflows in September.