Long term investments still entering PH, but at slower pace due to pandemic, says BSP

The country experienced less long term investments in the first 10 months of last year due to the effects of the coronavirus pandemic on the global economy, according to the central bank.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said foreign direct investments (FDI) reached $5.3 billion in net inflows for January to October 2020, which was 10.2 percent lower than the $5.9 billion net inflows posted in the same period in 2019.

“The decline in foreign direct investment net inflows reflected the adverse impact on investor sentiment amid the uncertainties surrounding the effect of a prolonged pandemic on the global economy,” the central bank said.

By component, nonresidents’ net investments in debt instruments fell by 21.4 percent to $3.4 billion from $4.3 billion. Reinvestment of earnings dropped by 20.5 percent to $704 million from $886 million.

Meanwhile, nonresidents’ net investments in equity capital grew by 72.1 percent to $1.2 billion from $696 million, which partly mitigated the decline in the cumulative foreign direct investment net inflows. Equity capital placements increased by 6.4 percent to $1.4 billion from $1.3 billion, while withdrawals decreased by 63.9 percent to $235 million from $652 million.

Equity capital infusions were sourced mainly from Japan, the Netherlands, the United States and Singapore. These were channeled largely to manufacturing, real estate, and financial and insurance industries.

Meanwhile, foreign direct investments continued to register net inflows, amounting to $423 million in October 2020, albeit 24.5 percent lower than the $561 million net inflows recorded in October 2019.

This resulted as all major investment components posted lower net inflows during the month.

In particular, nonresidents’ net investments in debt instruments declined by 16.8 percent to $358 million from $430 million in the same month in 2019.

Similarly, reinvestment of earnings declined by 20.6 percent to $65 million from $82 million in the comparable period in 2019.

“The slowdown in FDI during the month may be attributed in part to concerns over the resurgence of COVID-19 cases in the US, Japan and some European countries,” the central bank said.

Nonresidents’ net investments in equity capital decreased by 98.2 percent to $1 million in October 2020 from $49 million in October 2019.

The resulting modest inflows was on account of the steeper increase in equity capital withdrawals of 165.2 percent to $85 million compared to that of placements by 5.2 percent to $86 million.

The bulk of the equity capital placements originated from Japan, the Cayman Islands and the United States. These were invested mainly in manufacturing, real estate and information and communication industries.

The central bank stressed that its investment statistics were distinct from the data of other government sources because it covered 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. INQ