BSP notes surge in FDI to PH in June

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

MANILA, Philippines—Long term capital surged into the Philippine economy in June as foreign firms’ “reinvestments” into their local units added to inflows from the government’s foreign borrowings, according to the latest data from the central bank.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said foreign direct investment (FDI) net inflows in June 2021 rose by 60.4 percent year-on-year to reach $833 million from $519 million during the comparable period in 2020.

This development brought the long term capital net inflows for the first half of 2021 to $4.3 billion, higher by 40.7 percent from the $3.1 billion net inflows in January-June 2020.

The BSP said the higher cumulative FDI net inflows was due mainly to the 86.5 percent growth in non-residents’ net investments in debt instruments to $2.8 billion from $1.5 billion.

Similarly, reinvestment of earnings rose by 7.7 percent to $522 million from $484 million. However, net investments in equity capital declined by 8.9 percent to $971 million from $1.1 billion in 2020.

Net investments in debt instruments consist mainly of inter-company borrowing or lending between foreign direct investors and their subsidiaries or affiliates in the Philippines. The remaining portion of net investments in debt instruments are investments made by non-resident subsidiaries or associates in their resident direct investors.

FDI net inflows in June 2021 increased mainly on account of infusion by foreign direct investors to their subsidiaries or affiliates in the Philippines in the form of net investments in debt instruments, which rose year-on-year by 151.8 percent to $630 million. During this period, reinvestment of earnings grew by 23.4 percent to $110 million from $89 million.

Non-residents’ net investments in equity capital declined by 48.4 percent to $93 million in June 2021 from $180 million in the same month in 2020. This was due to the downturn in equity capital placements by 38.2 percent to $119 million from $192 million, along with the increase in equity capital withdrawals by 112 percent to $26 million from $12 million.

“Concerns over the spread of more transmissible Delta variant may have prompted investors to remain on the sidelines,” the BSP said. “Equity capital placements during the month originated mostly from Japan, the United States and Singapore. These were invested largely in the manufacturing, real estate, and financial and insurance industries.”

For the first semester of 2021, net investments in equity capital declined following the drop in placements by 10.4 percent to $1.1 billion from $1.3 billion. These were mostly from Singapore, Japan and the US.

Investments were channelled mainly to the manufacturing; financial and insurance; and electricity, gas, steam, and air-conditioning industries.

TSB