Inbound long-term capital rose in Oct despite global woes

The amount of Philippines-bound foreign direct investments (FDI) that exceed outbound flows increased by 6.3 percent to $923 million in October 2022 from $868 million in the same month of 2021 despite expectations of a global economic slowdown in 2023.

The latest data from the Bangko Sentral ng Pilipinas (BSP) was released as the World Bank warned that developing countries would be hit hard by a “sharp, long lasting slowdown.”

The October turnout brought the 10-month or January-October tally of net FDI inflows lower by 8.3 percent to $7.6 billion from the $8.3 billion net inflows recorded in the same period 2021.

The numbers represent capital that actually moved, instead of commitments or planned investments, which may or may not be realized fully.

In October alone, the year-on-year increase stopped a four-month downtrend that ended with a 7.9-percent decline in September.

“Despite the global economic headwinds, FDI net inflows rose on account of the increase in nonresidents’ net investments in debt instruments and equity capital of their local affiliates,” the BSP said in a statement.

There was a 5-percent rise in nonresidents’ net investments in debt instruments to $667 million from $635 million.

Also, net equity capital—other than the reinvestment of earnings—jumped 21 percent to $170 million from $141 million.

Most of the equity capital placements in October came from Japan, the United States and Singapore. These were invested mainly in the industries of financial and insurance; manufacturing, and real estate.

In the latest Global Economic Prospects report released on Jan. 11, the World Bank revised its forecast for the growth of the global economy to 1.7 percent, almost half the pace of 3 percent that it expected six months earlier or July 2022.

The multilateral lender said global growth is slowing sharply in the face of elevated inflation, higher interest rates, reduced investment and disruptions caused by Russia’s invasion of Ukraine.

Worse, any new adverse development—such as higher-than-expected inflation, abrupt rises in interest rates to contain it, a resurgence of the COVID-19 pandemic or escalating geopolitical tensions—could push the global economy back into recession as it was in 2020.