Global recession casts long shadow as FDIs in PH fall for 5 straight months

The entry of job-creating long term investments into the Philippines continued to slow down in July, marking the fifth consecutive month of decline since a slight uptick in February 2019 — a phenomenon the central bank attributed to jitters brought by a darkening global economic horizon.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that foreign direct investment net inflow fell 41.4 percent, or just $543 million, from $926 million in the same period in 2018.

For the first seven months of 2019, long term equity net inflow aggregated $4.1 billion, which was 39.1 percent lower than the $6.8 billion posted in 2018.

According to the BSP, these numbers ‘reflect the impact of the weak pace of global economic activity that took a toll on investors’ business confidence and investment decisions globally.”

For July alone, net investments by nonresidents on debt instruments, mainly borrowings between affiliated companies, reached $357 million. Net Investments by nonresidents in equity capital amounted to only $99 million in the same month.

Nonresident investment was lower than 2018’s because of a decrease in equity capital placements by 39.6 percent to $168 million from $278 million. Equity capital withdrawals pole-vaulted by 302.4 percent to $69 million from just $17 million in 2018.

Equity capital infusions during the month came mostly from Japan, Germany, Singapore, the United States and South Korea.

These were placed largely in financial and insurance firms; real estate; manufacturing and human health and social work industries.

Reinvestment of earnings increased by 15.8 percent to $87 million during the month from $75 million a year ago.

The lower figures for the first seven months of 2019, on the other hand, stemmed from the decline in nonresidents’ net investments in equity capital by 75.1 percent to $459 million (from $1.8 billion) and in debt instruments by 30.3 percent to $3.1 billion (from $4.4 billion).

During this period, placements of equity capital contracted by 49.2 percent to $1 billion (from $2 billion), and equity capital withdrawals bounced up by 215.8 percent to $569 million (from $180 million).

Equity capital placements from January to July emanated largely from Japan, the United States, Singapore, China and South Korea.

These were channeled mainly to financial and insurance firms; real estate activities; manufacturing; transportation and storage; and administrative and support service industries.

Reinvestment of earnings expanded by 12.6 percent to $595 million from $528 million in the same period in 2018. /TSB