Long-term investments that entered the Philippines from overseas rose sharply in the third month of this year due mainly to the spike in foreign loans made during the coronavirus pandemic, according to the central bank.
In a statement, the Bangko Sentral ng Pilipinas (BSP) said net inflows of foreign direct investment (FDI) grew by 139.5 percent to $808 million in March 2021 from the $337 million in the same month last year.
The favorable performance in March brought the cumulative net inflows of long term foreign investments to $2.4 billion in the first quarter of 2021, higher by 45.1 percent than the $1.6 billion net inflows recorded in the same period last year.
Improved investor sentiment
“The increase in foreign direct investments was mainly due to the 113.2-percent growth in nonresidents’ net investments in debt instruments to $1.4 billion from $671 million,” the central bank said, without specifying whether these borrowings were made by public or private entities. Data from the government showed, however, that it had borrowed aggressively over the past year to finance its COVID-19 response, with total debt incurred for this purpose having topped $15 billion as of April.
According to the central bank, reinvestment of earnings in March improved by 5.4 percent to $225 million from $213 million a year ago.
“March 2021 foreign direct investments increased on account of improved investor sentiment amid the gradual resumption of domestic activities, while adhering to the minimum health standards, and government efforts to accelerate the vaccination program,” the agency said.
“In particular, foreign direct investment net inflows during the period expanded due to the substantial increase in nonresidents’ net investments in debt instruments to $380 million from $45 million in the comparable month last year.”
Likewise, nonresidents’ net investments in equity capital rose by 52.8 percent to $349 million in March 2021 from $229 million a year ago. This developed as equity capital placements expanded by 35.9 percent to $377 million from $278 million, while withdrawals declined by 42.6 percent to $28 million from $49 million.
Equity capital placements
The bulk of the equity capital placements came mostly from Singapore, Japan and the United States. These investments were channeled mainly to the electricity, gas, steam and air-conditioning; and manufacturing industries. Similarly, reinvestment of earnings grew by 23.3 percent to $79 million from $64 million last year.
Meanwhile, the March growth in net investments in equity capital reduced the year-to-date contraction to 4.3 percent from 29.1 percent in February 2021, bringing the level to $721 million.
For the first three months of 2021, equity capital placements amounted to $828 million, while equity withdrawals reached $107 million.
Equity capital placements during the quarter were sourced largely from Singapore, Japan, the United States and the Netherlands. These were invested primarily to the electricity, gas, steam and air-conditioning; financial and insurance; and manufacturing industries. INQ