Strong overseas demand for PH debt buoys 2-month foreign investment tally

MANILA, Philippines—The Philippines saw more long term investments from overseas enter its economy last February, boosting the two-month total for this year by a fifth compared to 2020’s levels as the pandemic was unfolding, according to the Bangko Sentral ng Pilipinas (BSP).

In a statement, the BSP said that foreign direct investment net inflows in the first two months of 2021 were higher by 20.6 percent, or $1.6 billion, compared with $1.3 billion net inflows reported in the comparable period in 2020.

This was due mainly to the 67.7 percent expansion in non-residents’ net investments in debt instruments to $1.1 billion from $626 million—meaning foreigners allocated more money to various debt instruments issued by Philippine-domiciled public and private entities during the period.

By contrast, non-residents’ net investments in equity capital were lower at $372 million from $525 million in the same period in 2020.

This was mainly due to the contraction in equity capital placements to $451 million from $610 million, which more than offset the drop in withdrawals to $79 million from $85 million.

Equity capital placements during the period originated mostly from Singapore, Japan, the Netherlands and the United States.

These investments were channeled largely to financial and insurance; manufacturing; and real estate industries.

Similarly, reinvestment of earnings decreased by 2.3 percent to $146 million from $149 million in 2019.

For February alone, net long term investment inflows amounted to $608 million, which was 2.2 percent lower than the $621 million net inflows recorded in the same period in 2020.

This slight decline emanated mainly from the 88.3 percent drop in non-residents’ net investments in equity capital to $20 million in February 2021 from $175 million in the same month in 2020 as equity capital placements decreased by 62.1 percent to $89 million in February 2021 from $236 million, and withdrawals rose by 13.6 percent to $69 million from $61 million.

Equity capital placements for the month were primarily from Japan, the United States, the Netherlands, Malaysia and Singapore.

These were invested mainly in manufacturing; real estate; wholesale and retail trade; financial and insurance; and electricity, gas, steam, and air-conditioning supply industries.

The 36.1 percent increase in non-residents’ net investments in debt instruments to $515 million in February 2021 from $378 million in the same in 2020 tempered the decline in foreign direct investments.

Reinvestment of earnings also rose by 6.1 percent to $72 million from $68 million in February 2020.

The BSP’s investments statistics are distinct from the investment data of other government sources. They cover actual investment inflows, in contrast with the approved foreign investments data that are published by the Philippine Statistics Authority.

Unlike BSP’s actual investment flow, foreign investments are generated by investment promotion agencies and represent investment commitments, which may not materialize, for a given period.

TSB