Slowdown in foreign investments continues

The entry of long-term capital into the Philippines continued to slow down in May, confirming a consistent trend of weak investment inflows since the start of the year that was interrupted only by a slight uptick in February.

According to the Bangko Sentral ng Pilipinas, foreign direct investments registered a net inflow of $242 million in May 2019, representing an 85.1-percent decline from the $1.6 billion in net inflow posted in May 2018.

This was the weakest monthly inflow of long-term investments into the country since March 2015—or more than four years ago—which saw foreign direct investment inflow of only $200.4 million.

“This resulted mainly as net investments in debt instruments declined from $1.3 billion in May 2018 to $149 million during the month due mainly to higher prepayments and repayments of debt owed by resident enterprises to their foreign affiliates, coupled with the decline in their borrowings from their foreign affiliates,” the central bank said in a statement.

Moderate net inflow of equity capital amounting to $1 million from $241 million a year ago also contributed to the decline in foreign direct investments.

The central bank said that the bulk of the equity capital placements during the month were from the United States, Japan, Singapore, China and Hong Kong, and were invested largely in the real estate, manufacturing, financial and insurance, construction, and human health and social work industries.

Meanwhile, reinvestment of earnings amounted to $92 million, 15.9-percent higher than the $80 million recorded in the same month last year.

As a result of these developments, foreign direct investments recorded $3.1 billion in net inflow in the first five months of 2019, lower by 37.1 percent than the $5 billion in net inflow in the comparable period last year.

“This was due mainly to the drop in net equity capital investments as placements declined to $787 million from $1.5 billion, while withdrawals increased to $451 million from $139 million during the period,” the central bank said.

Net investments in debt instruments also decreased by 26 percent to $2.4 billion from $3.2 billion in the January to May 2018 period.

For the first five months of 2019, equity capital placements originated from Japan, the United States, China, Singapore and South Korea and went largely to financial and insurance; real estate; manufacturing; transportation and storage; and administrative and support service industries.

Reinvestment of earnings grew by 12.9 percent to $418 million from $371 million in the same period last year.