MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) said yesterday that foreign direct investments are expected to drop to only $700 million this year from $1.4 billion in 2008 as investors hold back their plans to invest in the Philippines in the midst of the global economic recession.
BSP Deputy Governor Diwa Guinigundo said that the central bank is making a “conservative” projection for this year, counting only foreign direct investments that are already in the pipeline and scheduled to come in this year.
According to Guinigundo, the expected FDI flows are seen to go into power and telecommunications although some inflows were also expected to go into mining and quarrying.
Guinigundo said the latest projections are already factored in to the projected gross international reserve level of $38 billion for 2009 and the balance of payments level of $700 million.
According to Cyd Amador, managing director of the BSP’s Monetary Stability Sector, the BSP would normally count pending applications in the various investment agencies.
“This time, because we know that risk aversion is pretty strong, we didn’t do that,” Amador said. “We only factored in the investments that are already scheduled to come in. These are inflows that are already in the pipeline that we are certain would come in this year, he added.”
But Guinigundo said the BSP is also projecting a significant increase in investments classified as “other accounts” which included project and program borrowings of the National Government as well as inter-company borrowing between Philippine companies and their foreign principals.
“Last year we saw a $3.1-billion outflow in other accounts because companies here were paying back loans to their parent companies,” Guinigundo explained. “This year we are seeing a higher propensity for them to borrow from parent companies. In the first two months of the year, there were more borrowings by domestic banks from their parents abroad, for instance.”
Guinigundo said the “other accounts” also included about $500 million in additional borrowing by the government and about $100 million worth of program loans from multilateral funding agencies.
Guinigundo said these inflows would lead to the projected $4.1-billion surplus in the current account of the balance of payments, also bolstered by $17-billion worth of remittances of which $16.4 billion would go through banks.
“We did not change our remittance forecast of a zero growth this year,” Guinigundo said. “We think remittances would go down a lot slower than most market analysts believe.”
Banks and credit rating agencies have been projecting remittances to decline anywhere between six percent to as much as 25 percent as Filipino workers contend with declining income as well as job losses.