Foreign investments surged in Jan

Short-term portfolio investments may be leaving the Philippines, but long-term capital from overseas is headed in the opposite direction, having risen sharply in January on the back of the country’s positive economic prospects, the central bank said.

The Bangko Sentral ng Pilipinas said foreign direct investments (FDIs) yielded net inflows of $919 million in January 2018, an increase of 56.7 percent from the same month last year.

The strong performance in the first month of the year sustained the positive momentum in the growth of foreign equity capital in the country after the central bank reported that businessmen from overseas brought in a record amount of investments into the country in the first full year of the Duterte administration—a record high $10 billion in 2017, up by 21.4 percent from the year-ago level.

“Investor outlook on the country’s economic performance remained positive on the back of strong macroeconomic fundamentals,” the BSP said.

Net equity capital inflows, which accounted for the bulk of FDIs last January, rose more than eight times to $473 million from $58 million in the previous year.

This was driven by the sevenfold increase in equity capital placements to $531 million, while withdrawals amounted to only $58 million during the month.

Equity capital placements were sourced largely from Singapore, China, Taiwan, Japan and the United States.

These capital infusions were invested mainly in manufacturing; financial and insurance; real estate; electricity, gas, steam and air-conditioning supply, and wholesale and retail trade activities.

Meanwhile, net investments in debt instruments issued by local affiliates, consisting of intercompany loans, declined by 16.7 percent to $381 million. Reinvestment of earnings also decreased moderately by 8.4 percent to $65 million during the period.

The BSP’s statistics on FDIs cover actual investment inflows, which could be in the form of equity capital, reinvestment of earnings and borrowings between affiliates. In contrast to investment data from other government sources, the central bank’s data include investments where ownership by the foreign enterprise is at least 10 percent.

Meanwhile, data of investment promotion agencies do not make use of the 10-percent threshold and include borrowings from foreign sources that are non-affiliates of the domestic company. Furthermore, the BSP’s data are presented in net terms (i.e., equity capital placements less withdrawals), while the investment agencies’ numbers do not account for equity withdrawals, the central bank said, in an effort to explain its more conservative investment tally.

Despite the surge in foreign equity capital, however, hard currency continued to flow out of the country during the first month of the year due in part to the central bank’s efforts to smoothen out volatility in the peso-dollar exchange rate and the government’s payments of its foreign loans.

As such, the country’s overall balance-of-payments position in January 2018 posted a deficit of $531 million, higher than the $9-million deficit in the same month last year.

The January level was already half of the central bank’s forecast for the entire year of a $1-billion deficit in the BOP, which is the aggregate net value of all dollar flows into and out of the Philippine economy for all types of transactions with foreign entities.