Foreign investments plunged by 44% to $793M in Nov 2022

The country’s net foreign direct investments (FDI) plunged by 43.6 percent in November 2022 as investors preferred to put their funds in overseas markets, especially the United States.

Data from the Bangko Sentral ng Pilipinas (BSP) show that net FDI in November settled at $793 million, down from $1.4 billion in the same month of 2021.

This represents capital that actually moved, instead of avowed commitments or planned investments that may not push through, thus a better gauge of investor appetite.

November results represented a reversal from the 6.3-percent growth in October 2022 as well as the 149-percent surge in November the previous year.

Equity placements

Also, the November turnout brought the 11-month or January-November tally to a net FDI inflow of $8.4 billion, a decrease of 13.4 percent from the $9.7 billion net inflow recorded in the same period in 2021.

The BSP said that in November alone, the significant decrease was mainly due to a net drop in investments in securities and earnings being kept onshore instead of being sent to investors’ home base. This failed to offset an increase in equity placements.

Also in November, there was a 55-percent drop in non-residents’ net investments in debt instruments, to $540 million from $1.5 billion.

Also, reinvestment of capital decreased by 12.6 percent to $73 billion from $84 million.

On the other hand, net equity capital—other than the reinvestment of earnings—increased for the third consecutive month, this time by 41.8 percent to $180 million from $118 million.

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

Debt instruments

Similarly, January-November net investments in debt instruments decreased by 17.7 percent to $5.9 billion from $7.2 billion, and reinvestment of earnings by 8 percent to $1.08 billion from $1.2 billion.

Eleven-month net equity capital increased by 4.2 percent to $1.44 billion from $1.39 billion.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said that despite the drop in November, the net FDI inflow was still near the highest since the pandemic started.

“The year-on-year decline may have to do with higher base or denominator effects— after $1.408 billion a year ago or in November 2021,” Ricafort said.

He added that the slowdown may also have to do with higher interest rates in the United States and fears of recession that dragged on investments and FDIs.

For the coming months, net FDIs inflows could still be sustained at high levels since the pandemic started, as the economy has reopened toward greater normalcy and still expected to have one of the fastest growth rates in the region,” Ricafort added.