Long term foreign investments in the Philippines surged in the first month of this year, but the central bank noted that this was before the government gave stay-at-home orders that kept people away from offices and factories and resulted in economic contraction over the last three months.
In a statement, the Bangko Sentral ng Pilipinas (BSP) said foreign direct investment net inflows grew by 12.1 percent in January 2020 to reach $657 million from $586 million in January 2019.
“This development, which was before the imposition of the community quarantine in the country due to COVID-19, reflects continued investor confidence in the Philippine economy, despite global economic uncertainties,” the central bank said.
The increase in foreign direct investments last January was boosted by net inflows of equity capital, amounting to $352 million, a reversal from net withdrawal of $43 million in January 2019.
In particular, equity capital placements more than doubled to $373 million from $186 million, while withdrawals decreased by 90.7 percent to $21 million from $229 million.
Equity capital placements during the month originated largely from the Netherlands and Singapore, the central bank said, noting that these were invested mostly in the manufacturing and real estate industries.
Net investments in debt instruments issued by local affiliates, consisting mainly of inter-company borrowings, fell by 57.9 percent to $233 million from $553 million a year ago.
Likewise, reinvestment of earnings declined moderately by 5.1 percent to $72 million during the month from $76 million.
The central bank had earlier projected total foreign direct investment net inflows of $8.8 billion for 2020, but this goal was set before the onset of the pandemic and will likely be revised downward substantially.
For 2019, the BSP said the country experienced $7.6 billion in net inflows of foreign direct investments. This represented a 23.1-percent decrease from the $9.9 billion net inflow in 2018, and marked the second consecutive year of decline for this key economic indicator.
According to the central bank, foreign direct investments include investments by non-resident direct investor in a resident enterprise, whose equity capital in the firm is at least 10 percent, and investments made by non-resident subsidiaries or associates in resident direct investors. These inflows can be in the form of equity capital, reinvestment of earnings and borrowings.
The BSP’s statistics cover actual investment inflows, in contrast to those of other government agencies which represent investment commitments that may not necessarily be realized fully in a given period.