Long term capital inflows into PH declined in 2018, says BSP

Bangko Sentral ng Pilipinas (BSP). RYAN LEAGOGO/INQUIRER.net FILE PHOTO

MANILA, Philippines – Long term equity investments into the country weakened in 2018 as foreign firms infused less capital into local ventures — capping off five straight months of weaker inflows — the latest data from the Bangko Sentral ng Pilipinas (BSP) showed.

In a statement, the central bank said foreign direct investments (FDI) for all of last year reached $9.8 billion, representing a decline of 4.4 percent from the $10.3 billion net inflows in 2017.

“The bulk of equity capital placements in 2018 were sourced mainly from Singapore, the United States, Hong Kong, Japan and China,” the central bank said, adding that these investments were channeled primarily to manufacturing; financial and insurance; real estate; electricity, gas, steam and air-conditioning supply; and arts, entertainment and recreation industries.

Net investments of equity capital were lower at $2.3 billion compared to $3.4 billion recorded in 2017. Reinvestment of earnings also declined slightly by 0.4 percent to $859 million in 2018 from $863 million in 2017. By contrast, net availment of debt instruments rose by 11.3 percent to $6.7 billion in 2018 from $6 billion in 2017.

The BSP data showed that, while foreign direct investments had surged earlier in the year, they began to weaken starting August 2018, and consistently came in lower on an annual basis since then.

BSP’s definition of foreign direct investments cover actual investment inflows, which could be in the form of equity capital, reinvestment of earnings, and borrowings between affiliates — funds that tend to stay in the country for five years or more. This is in contrast with short term portfolio inflows which can immediately rush in or out to take advantage of trading opportunities in local financial markets.

For December 2018 alone, foreign direct investments registered $677 million in net inflows. This level was 4.8 percent lower than the $712 million net inflows recorded in the same month of 2017.

“The decline in FDI was due largely to the 57.6-percent drop in net investments of equity capital to $132 million from $312 million a year ago,” the central bank said.

Equity capital placements during the month originated mainly from Thailand, the United States, Japan, Singapore, and the Netherlands.

By economic activity, the December placements were invested largely in financial and insurance; electricity, gas, steam and air-conditioning supply; wholesale and retail trade; manufacturing; and real estate industries.

December reinvestment of earnings also declined to $61 million from $65 million. Meanwhile, net investments in debt instruments (consisting mainly of intercompany borrowings or lending between foreign direct investors and their subsidiaries or affiliates in the Philippines) increased by 44.7 percent to $484 million in December 2018 from $335 million in December 2017. /kga