MANILA, Philippines – Elections likely caused investor jitters in May, pulling down foreign direct investments (FDI) by nearly a 10th, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.
FDI recorded a net inflow of $364 million, 9.6 percent down from $403 million in the same period a year ago. A net inflow indicates more investments entered the country than left.
The BSP did not provide any explanation, but Emilio Neri Jr., lead economist at Bank of the Philippine Islands, said the national elections last May 9 could be the reason.
“This could be a transitory dip given that it was an election month. Investors probably were in a wait-and-see attitude,” Neri said in a phone interview.
“We could have probably seen a bounce back in June since we had an orderly election,” he added.
Broken down, the bulk of FDI in May were funneled in debt instruments amounting to $220 million, up 15.4 percent year-on-year, data showed.
Reinvested earnings also rose by a faster 26.1 percent to $65 million.
Equity investments – which are placements by head offices on their subsidiaries here and considered the best FDI – however declined 32.1 percent to a net inflow of $144 million.
From January to May, FDI net inflow was still more than double last year’s level at $3.86 billion, rising across-the-board led by debt holdings’ 143.7-percent growth.
Equity placements, which rose 127 percent for the first five months, mainly came from Japan, Hong Kong, Singapore, the US and Taiwan.
Reinvestments inched up 0.8 percent during the same period.
“Investor sentiment was buoyed by the country’s sound macroeconomic fundamentals and its non-inflationary (economic) growth as well as positive growth prospects for the Philippine economy,” BSP said
Neri said meeting the central bank forecast of $6.3 billion FDI net inflow this year is not impossible.
“But when compared with our Southeast Asian peers, that is still considerably low. We need to attract more FDI to facilitate job-generation and help support growth,” he said.