FDI inflows reach US$499M in May

Bangko Sentral ng Pilipinas (File photo / Philippine Daily Inquirer)

MANILA, Philippines – Net inflows of foreign direct investments reached US$499 million in May this year, the Bangko Sentral ng Pilipinas (BSP) said on Tuesday.

Data released by the Bangko Sentral ng Pilipinas (BSP) showed that the FDI net inflows during the month declined by 1.0 percent from the US$504 million inflows recorded in May 2023.

FDIs include investment by a non-resident direct investor in a resident enterprise, whose equity capital in the latter is at least 10 percent, and investment made by a non-resident subsidiary or associate in its resident direct investor.

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The BSP said an FDI can be in the form of equity capital, reinvestment of earnings, and borrowings.

According to the BSP, the decline in net inflows in May emanated mainly from the 31.7 percent drop in nonresidents’ net investments in equity capital (other than reinvestment of earnings) to US$161 million from US$235 million in May 2023.

Reinvestment of earnings also decreased marginally by 3.7 percent to US$97 million from US$101 million.

Meanwhile, nonresidents’ net investments in debt instruments increased by 43.4 percent to US$242 million from US$169 million in May 2023.

The BSP said top sources of FDIs during the month include Japan, United States, and Hong Kong.

These were channeled primarily to manufacturing, real estate, and arts entertainment, and recreation industries.

For the first five months of the year, FDI net inflows grew by 15.8 percent to US$4.0 billion from the US$3.5 billion net inflows reported in January-May 2023.

Top country sources include the United Kingdom, Japan, and the United States, and were channeled to manufacturing and real estate.

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In a comment, Rizal Commercial Banking Corporation chief economist Michael Ricafort said the 1 percent decline in FDI net inflows in May was largely brought about by the geopolitical risks given the unprecedented direct attacks between Iran and Israel from April 1 to 20, 2024.

Ricafort said the FDI data also weighed in recent months by the still relatively higher US and local interest rates that increased borrowing costs for global and local investors and slowed down FDIs.

“Nevertheless, the Philippine economic growth is among the fastest in ASEAN and long-term U.S. and local interest rates already eased from the immediate highs since November 2023, thereby encouraging more FDIs to come into the country amid favorable demographics and lower long-term interest rates that help spur investments globally, including FDIs into the country,” said Ricafort.

“For the coming months, possible cuts in the U.S. and local policy rates later in 2024 and in 2025, especially if inflation remains well anchored within the inflation target of the central bank, could also lead to further pick up in FDIs eventually,” he added.