FDIs continue to shrink, down 19% in Aug to $797M

The Philippines recorded decreasing net inflows of foreign direct investments (FDI) for the third straight month, dropping by 19 percent to $797 million in August from $987 million in the same month of 2021, according to the Bangko Sentral ng Pilipinas (BSP).

The decrease in August, however, was considerably slower than the 64.4 percent recorded in July when net inflows sank to $460 million from $1.3 billion.

The August result brought the year-to-date or January to August readout to net inflows of $5.9 billion, down 13 percent from $6.8 billion in the same period last year.

Also, the decrease of net inflows for the first eight months was a reversal from a 47.1-percent surge in the same period of 2021 when more economic activity resumed as COVID-19 restrictions eased.

“The slowdown in FDI may be attributed to concerns over weakening global growth prospects, particularly with the moderating demand and policy tightening in major economies,” the BSP said in a statement.

The data represent capital that actually moved, instead of avowed commitment or planned investments, which may or may not be realized fully.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said net inflows in August were the highest in four months or since the $989 million April 2022.

“However, net FDIs are still among the lowest in nearly a year, as recently weighed by higher inflation, weaker peso exchange rate and the sharp increase in interest rates [here and abroad],” Ricafort said.

“Net FDIs still eased from among prepandemic highs in previous months, but could still pick up in the coming months … in view of the investment commitments from the [new administration officials’] recent visits to Indonesia, Singapore and the United States,” he added.

From January to August, nonresidents’ net investments in debt instruments likewise fell by 13 percent to $4.16 billion this year from $4.78 billion last year.

In addition, net equity placements other than reinvestment of earnings decreased by 17.1 percent to $907 million from $1.13 billion.

Further, reinvestment of earnings settled at $836 million, decreasing by 8 percent from $908 million in the same period last year.

In August alone, all major FDI components posted lower net inflows. In particular, nonresidents’ net investments in debt instruments of their local affiliates fell by 15.3 percent to $600 million from $709 million.

Most of the equity capital placements in August came from Japan and the United States. These were invested mainly in the industries of manufacturing, real estate and information and communication. INQ