Foreign direct investments fell in April due to problems in global economy — BSP

MANILA, Philippines – 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 liquidity.

The Bangko Sentral ng Pilipinas cited the lingering debt problem of the Euro zone, the anemic growth of the US and Japanese economies, 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.

Data from the BSP showed that net inflows of foreign direct investments amounted to $81 million in April, down by 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 in January to April reached only $552 million, down by 15 percent from $650 million in the same period in 2010.

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 have been highly influenced by external factors, and so the economic and political problems offshore had generally dampened appetite of foreign investors even if the Philippines and other emerging economies were performing relatively well.

The drop in foreign direct investments, which are normally long-term in nature and have the better ability to create jobs, was contradictory to the steep rise in foreign portfolio investments.

Net inflows of foreign portfolio investments, such as bonds and stocks, amounted to $2 billion in the first five months of the year, up by 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 on the country’s economy, at least for the short term.

Economists said, however, that the country should have more long-term and job-generating investments. Portfolio investments, which could be easily withdrawn, could cause volatility in the exchange rate and would not contribute much to economic growth as direct investments could, they said.