FDI up in August as firms get loans from parent companies

MANILA, Philippines—More long term capital entered the Philippines in August driven mainly by loans by overseas firms to their local units, and pushing the eight-month tally of foreign direct investments (FDI) further into positive territory, the central bank said on Wednesday (Nov. 10).

In a statement, the Bangko Sentral ng Pilipinas (BSP) said FDI net inflows in August 2021 expanded by 19.8 percent year-on-year to reach $812 million from $677 million in the same period in 2020.

This development brought the FDI net inflows for the first eight months of 2021 to $6.4 billion, higher by 39.7 percent than the $4.6 billion net inflows in the comparable period in 2020.

The cumulative FDI net inflows rose on the back of the 71.6 percent growth in non-residents’ net investments in debt instruments to $4.5 billion from $2.6 billion.

Likewise, reinvestment of earnings rose by 11.0 percent to $776 million from the $699 million registered last year.

However, non-residents’ net investments in equity capital, other than reinvestment of earnings, declined by 12.2 percent to $1.1 billion, from $1.2 billion in 2020.

Net investments in equity capital fell as placements dropped by 8.2 percent to $1.4 billion from $1.5 billion and withdrawals increased by 12.1 percent to $272 million from $243 million.

Equity capital placements came primarily from Singapore, Japan and the United States. These were channeled mainly to the manufacturing; financial and insurance; electricity, gas, steam, and air-conditioning; and real estate industries.

For August 2021, the expansion in FDI net inflows was driven by non-residents’ net investments in debt instruments, which grew by 38 percent year-on-year to $636 million from $461 million in August 2020.

Reinvestment of earnings contracted by 24.7 percent to $99 million from $132 million. Likewise, non-residents’ net investments in equity capital declined by 9.7 percent to $77 million from $85 million in August 2020.

This was due to the rise in equity capital withdrawals (by 51.2 percent to $50 million from $33 million, which more than offset the increase in equity capital placements by 7.3 percent to $126 million from $118 million.

Equity capital placements originated mostly from Japan, the Netherlands, and the United States. These were directed largely to the manufacturing; information and communication; and real estate industries.

TSB