Pandemic constricts inflow of foreign investments

The amount of long-term equity investments entering the Philippines from abroad declined in the first quarter, punctuated by a sharp slowdown in March, which the central bank attributed to the onset of the coronavirus pandemic.

In a statement, the Bangko Sentral ng Pilipinas said that net inflow of foreign direct investment (FDIs) contracted by 14.2 percent to $1.7 billion for the first quarter of 2020 from the $1.9 billion in net inflow in the comparable period last year.

This developed on account of the 41-percent decline in net investments in debt instruments to $828 million from $1.4 billion. Likewise, reinvestment of earnings dipped by 24.1 percent to $187 million from $247 million in the previous year.

The downturn was mitigated partly by the 120.7-percent growth in net equity capital placements to $653 million from $296 million.

In particular, gross placements expanded by 22.8 percent to $714 million from $582 million, and withdrawals decreased by 78.6 percent to $61 million from $286 million.

The source countries of the bulk of the equity capital placements during the period were the Netherlands, Japan and Singapore. These placements were channeled mainly to the manufacturing, administrative and support service, and real estate industries.

In March 2020 alone, net inflow of foreign direct investments reached $507 million, which was 18.5-percent lower than the $622 million in net inflow in March 2019.

“The progression of the COVID-19 crisis into a full-scale pandemic and its adverse impact on the global economy dampened investor sentiment and investment activity during the month,” the central bank said.

The decline in total FDI net inflow was largely due to the 33.5-percent reduction in net investments in debt instruments to $278 million from $419 million in the same month last year.

Similarly, reinvestment of earnings fell by 37.9 percent to $57 million from $91 million.

Meanwhile, net equity capital placements increased by 53.1 percent to $172 million in March 2020 from $112 million in March 2019. INQ