Foreign investments shrink to $7.6 billion, lowest in 4 years

MANILA, Philippines — Net foreign direct investment (FDI) inflows fell by 23.1 percent to a four-year low of $7.65 billion in 2019 from $9.95 billion in 2018 and the figure is expected to decline further due to the impact of the rapid spread of the coronavirus disease 2019 or COVID-19, according to the Bangko Sentral ng Pilipinas (BSP).

The net inflows of long-term investments declined for the third straight year after hitting an all-time high of $10.26 billion in 2017 as global uncertainties continued to dampen investor sentiment. This was the lowest inflow since reaching $8.28 billion in 2016.

“Notwithstanding the country’s sound macroeconomic fundamentals, global uncertainties dampened investor sentiment during the year,” the BSP said.

The net FDI inflows last year also exceeded the lowered target of $6.8 billion.

Data released by the central bank showed that equity placements went down by 26.8 percent to $2.15 billion in 2019 from $2.93 billion in 2018.

The BSP said equity capital came from Singapore, Japan and the US that were channeled to financial and insurance; real estate; electricity, gas, steam and airconditioning supply as well as manufacturing industries.

On the other hand, capital withdrawals went up by 18.4 percent to $698 million from $590 million.

Statistics also showed that reinvestment of earnings increased by 16.6 percent to $1,05 billion from $897 million, while non-residents’ investments in debt instruments consisting mainly of loans extended by parent companies abroad to their local affiliates fell by 23.2 percent to $5.15 billion from $6.71 billion.

For December alone, the BSP said net FDI inflows surged by 69 percent to a 19-month high of $1.15 billion from $683 million in the same month last year.

This was the highest net FDI inflows since the $1.73 billion booked in May 2018.

For this year, the Monetary Board sees net FDI inflows reaching $8.8 billion.

However, global developments including the rapid spread of COVID-19 with more than 110,000 cases and 4,000 deaths could further dampen investor sentiment.

“We expect FDI to continue to slowdown due to mounting uncertainties in the global environment which continue to dampen investor sentiment, both externally and domestically,” BSP Governor Benjamin Diokno said earlier in a speech.

Diokno said investor confidence remained muted due to uncertainty brought about by dim global economic outlook and delayed passage of the second tranche of the tax reform program.