Direct, portfolio investment inflows seen to rise this year

The Bangko Sentral ng Pilipinas sees foreign investments—both direct and portfolio types—growing this year to further boost the country’s foreign exchange reserves, which already hit an all-time high last year.

In a briefing Tuesday, BSP Governor Amando Tetangco Jr. said the Philippines may see more foreign investments this year on the back of a favorable economic outlook for the country.

The foreign investment inflows are seen to beef up the country’s foreign exchange reserves that have so far reached $76 billion.

Tetangco said that, like other emerging markets, the Philippines has become attractive to portfolio fund managers given the country’s favorable macroeconomic conditions and interest-rate settings.

Although central banks in emerging Asian economies are cutting interest rates, these are still higher compared with those seen in advanced economies.

“Emerging markets will remain the driver of global growth this year. Besides, most emerging markets still have monetary policy space,” Tetangco said in the briefing organized by Global Finance, an international publication.

Last year, portfolio investments into the Philippines amounted to $4.08 billion. This was down by 11.5 percent from $4.61 billion in the previous year, and the decline was blamed on the economic and debt woes in the United States and the Eurozone, which dampened the global economic outlook.

But for this year, Tetangco said there is a potential for foreign portfolio inflows to increase.

Economists have said that the global economic performance may be better this year than last year, given indications of an improving US economy, such as declining unemployment rate and rising consumption.

Tetangco said that with an improved global economic outlook, foreign fund managers will have better investment appetite. In this scenario, he said emerging markets—which are seen to flow faster where interest rates are higher—are favored over advanced economies.

In terms of foreign direct investments, Tetangco said these are also likely to grow this year amid the government’s push for infrastructure development.

He said infrastructure projects lined up for this year should entice more foreign enterprises to do more business in the Philippines.