BSP: August FDI inflows on 4-month winning streak, but still below 2019 levels

MANILA, Philippines — Inflows of long term investments from overseas rose for the fourth consecutive month in August, which the central bank attributed to confidence in the government’s economic measures to address the fallout of the coronavirus pandemic.

Data from the Bangko Sentral ng Pilipinas (BSP) showed, however, that this uptrend was still insufficient to match foreign direct investment (FDI) levels during the same period last year, with the January-August 2020 net figure coming in 5.6 percent lower than the same period last year.

According to the BSP, the net inflow of long-term investments continued its growth momentum in August 2020 alone, recording a 46.9 percent expansion year-on-year to $637 million from $434 million in August 2019.

“These net inflows increased for the fourth consecutive month, owing to investors’ renewed confidence as the national government’s fiscal stimulus and BSP’s accommodative monetary policy stance to mitigate the impact of COVID-19 pandemic gained traction along with the easing of quarantine measures in the country,” the central bank said.

The growth in FDI net inflows during the month was largely on account of the 72.2 percent growth in net investments in debt instruments, which amounted to $459 million from $267 million in the comparable month last year.

Similarly, net equity capital investments rose by 32.9 percent to $107 million during the review period from $81 million a year ago as the growth in equity capital placements (30.1 percent to $118 million) offset withdrawals (7.1 percent to $10 million).

The bulk of the equity capital placements during the month originated from Japan, the United States, and the British Virgin Islands. These were invested mainly in manufacturing; real estate; financial and insurance; and professional, scientific, and technical industries.

Reinvestment of earnings declined by 17.9 percent to $71 million in August 2020 from $86 million last year.

On a cumulative basis, the foreign direct investment net inflows contracted by 5.6 percent to $4.4 billion from January to August 2020 as compared to the $4.7 billion net inflows in the same period last year.

“The four consecutive months of growth since May resulted in the considerable narrowing of the cumulative net foreign direct investment contraction of 27.9 percent in April 2020,” the central bank said, adding that this lower contraction can be attributed to net inflows in equity capital investments and debt instruments in the May-Aug period.

By component, equity capital placements increased by 8.1 percent to $1.2 billion from $1.1 billion, while withdrawals dipped by 77.1 percent to $136 million from $591 million.

Equity capital placements during the period came mostly from Japan, the Netherlands, the United States, and Singapore. Investments were channeled largely to manufacturing; real estate; financial and insurance; administrative and support service; and wholesale and retail trade industries.

Cumulative net investments in debt instruments and reinvestment of earnings also improved, posting lower declines of 19.3 percent from 47.3 percent by April, to $2.8 billion and 20.6 percent from 22.2 percent by May to $577 million, respectively.