FDI net inflows shrank by 16% in Jan to $819M

Net inflows of foreign direct investments (FDI) fell by 16 percent year-on-year last January, settling at $819 million from $975 million in the same month of 2021, amid a surge in COVID-19 cases.

The Bangko Sentral ng Pilipinas (BSP) said in a statement the $156-million drop reflected a 68-percent plunge in equity capital placements.

In January, inflows that went to equity capital amounted to $118 million compared to $370 million at the beginning of 2021.

For the most part, capital infusions from abroad went into local enterprises that are engaged in manufacturing; financial and insurance; and real estate.

A big chunk of this year’s first-month equity capital placements came from Japan, the United States, the Netherlands and Malaysia.

Investor concerns

“This [decline] may be due largely to investor concerns following the resurgence of cases of the highly transmissible Omicron COVID-19 variant in the country and the re-imposition of stricter quarantine measures in early January,” the BSP said.

Reinvestment of earnings—another form of FDI— reached $78 in January, easing slightly from $79 million in the same month last year.

Further, nonresidents’ net investments in debt instruments—the third form of FDI —jumped by 18 percent to $634 million in January this year from $536 million previously.

The BSP said borrowing inflows in January were infused to local affiliates to finance their operational needs.

In the previous three months, the fourth quarter of 2021, rising inflows of FDI in debt instruments helped put the Philippines’ international investment position (IIP) at a net external liability of $27.6 billion.

External liabilities

This was wider by 22 percent than the $22.6 billion net external liability at the end of September 2021.

Also, the net external liability expanded by 30 percent from $21.3 billion at the end of 2020.

The expansion in outstanding external financial liabilities was due to the increase in the stock of foreign direct investments, other investments and foreign portfolio investments.

As of end-2021, total outstanding external financial liabilities reached $268.6 billion, while total outstanding external financial assets amounted to $241 billion.

Recorded every end of a quarter, the IIP shows the difference between the value of financial assets of the country’s residents that are claims on nonresidents or are gold bullion held as reserve assets, from the liabilities of residents to nonresidents. INQ