Foreign investments down 15%; BSP blames external factors

FOREIGN DIRECT investments into the country continued to fall in April, a development monetary officials blamed on unfavorable events offshore that were said to have prompted fund owners to hold on to their money.

The Bangko Sentral ng Pilipinas cited the lingering debt problem of the euro zone, the anemic growth of the United States and Japan as well as the political unrest in some countries in the Middle East and North Africa.

“[Inflows] dropped owing to generally sluggish growth in advanced economies, particularly Japan and the United States, and the prevailing cautious investor sentiment amid heightened uncertainties,” the BSP said in a report.

Documents from the BSP showed that net inflows of foreign direct investments amounted to $81 million in April, down 4.7 percent from $85 million in the same month last year.

In the first four months, the figure was also not encouraging. Net inflows from January to April amounted to only $552 million, down 15 percent from $650 million in the same period last year.

The net inflow of FDIs to the Philippines was a result of $601 million in gross inflow and $49 million in outflow.

The inflows benefited mostly the real estate, mining, manufacturing, wholesale and retail trade, utilities and construction sectors, the BSP said.

Moreover, the inflows came mostly from investors based in the United States, Singapore, Hong Kong, Japan and the Netherlands.

The BSP said foreign direct investments were highly influenced by external factors and the economic and political problems offshore generally dampened the appetite of foreign investors even if the Philippines and other emerging economies were performing relatively well.

In contrast, short-term foreign portfolio investments continued to grow.

Net inflows of foreign portfolio investments amounted to $2 billion in the first five months of the year, up 160 percent from only $772 million in the same period last year, latest data from the BSP showed.

Officials said the steep rise in “hot money” inflows was a manifestation of confidence of investors in the country’s economy, at least for the short term.

Economists said, however, that what the country needed was long-term and job-generating investment. Portfolio investments, since these are easily withdrawn, usually only causes volatility in the exchange rate and do not contribute much to economic growth as direct investments do.