Long term investments in PH fall 25 percent in 2020 as pandemic hit

MANILA, Philippines—Long term investments in the Philippines declined by a quarter in 2020, highlighted by an even sharper fall in December of that year, due to the economic turmoil brought by the COVID-19 pandemic, according to the Bangko Sentral ng Pilipinas (BSP).

In a statement, the BSP said that foreign direct investments in 2020 amounted to $6.5 billion, which represented a contraction of 24.6 percent from the $8.7 billion net inflows in 2019.

“The disruptive impact of the pandemic on global supply chains and the weak business outlook adversely affected investor decisions in 2020,” it said.

By component, nonresidents’ net investments in debt instruments contracted by 22 percent to $4.1 billion in 2020 from $5.2 billion in 2019. Likewise, nonresidents’ net equity capital investments dropped by 35.7 percent to $1.5 billion in 2020 from $2.3 billion.

Bulk of the equity capital placements during the period came from Japan, the Netherlands, the United States and Singapore.

Capital infusions were poured mainly on the manufacturing, real estate, and financial and insurance industries.

Reinvestment of earnings declined by 13.6 percent to $978 million from $1.1 billion in 2019.

For December 2020 alone, foreign direct investments registered $509 million in net inflows, 62.6 percent lower than the $1.4 billion net inflows recorded in the same period of 2019.

The year-on-year decline in foreign direct investments in December 2020 was due mainly to base effects resulting from significantly large inflows from net investments in equity capital and debt instruments in December 2019, the BSP said.

Nonresidents’ net equity capital investments were lower by 89.8 percent at $78 million in December 2020 from $766 million in the same month in 2019.

This outcome stemmed mainly from the 87.8 percent contraction in equity capital placements to $97 million from $800 million, which was tempered partly by the 42.9 percent drop in equity capital withdrawals to $20 million from $34 million.

Equity capital placements came mostly from Japan, the United States, the Netherlands and Singapore. These were channeled primarily to the manufacturing, real estate, and financial and insurance industries.

Similarly, nonresidents’ net investments in debt instruments were lower by 31.1 percent at $360 million in December 2020 from $523 million in the comparable period in 2019. Reinvestment of earnings slightly decreased by 2.6 percent to $71 million from $73 million in December 2019.

TSB