BSP: PH’s long-term foreign investments continued sharp downtrend in April

MANILA, Philippines — The amount of long-term equity investments entering the Philippines from abroad declined sharply in April, extending a downtrend experienced in the first quarter, which the central bank attributed to the onset of the coronavirus pandemic.

In a statement, the Bangko Sentral ng Pilipinas said foreign direct investments registered net inflows of $311 million in April 2020, representing a decline of 67.9 percent from the $971 million net inflows posted in the same month last year.

“The slowdown in [investment] inflows reflected the continued weak global and domestic demand prospects prompting many investors to put on hold investment plans amid the unresolved COVID-19 pandemic,” the central bank said.

The drop in foreign direct investment net inflows in April 2020 resulted from lower net investments in debt instruments, which declined by 73.2 percent to $223 million, and in equity capital, which decreased by 82.6 percent to $7 million.

In particular, equity capital placements declined by 68.3 percent to $47 million from $147 million.

The bulk of the equity capital placements were sourced from Japan, the United States, Singapore and Germany. These investments were channeled mostly to the manufacturing, wholesale and retail trade, and real estate industries.

Likewise, reinvestment of earnings decreased by 15.8 percent to $81 million from $96 million in the same period last year.
As a result of these developments, foreign direct investment net inflows during the first four months of the year reached $2 billion, lower by 32.1 percent than the $2.9 billion net inflows recorded in the comparable period last year.

This was due largely to the 53 percent decline in net investments in debt instruments to $1.1 billion from $2.2 billion. In addition, reinvestment of earnings contracted by 21.7 percent to $269 million during the review period from $343 million a year ago.

The central bank said the reduction in foreign direct investments for the January to April 2020 period was tempered by the 95.2 percent increase in net investments in equity capital to $661 million from $338 million.

Equity capital placements emanated largely from the Netherlands, Japan and Singapore during the period. These were invested mainly into the manufacturing, real estate and administrative and support service industries.

Foreign direct investments include inflows made by non-resident direct investors in a resident enterprise, whose equity capital in the latter is at least 10 percent, and investments made by non-resident subsidiaries or associates in their resident direct investors.

These inflows can be in the form of equity capital, reinvestment of earnings or borrowings.

The central bank’s foreign direct investment statistics are distinct from the data of other government sources, as the BSP’s numbers cover actual investment inflows. By contrast, the approved foreign investments data that are published by the Philippine Statistics Authority, which are sourced from investment promotion agencies, represent investment commitments, which may not necessarily be realized fully, in a given period.

JPV