FDI sinks in March as investor fears show on outbreak
MANILA, Philippines — Foreign direct investments (FDI) declined for the second straight month in March, but the full consequence of the pandemic over investor sentiment is likely to be felt months ahead, painting a grim picture on future inflows.
FDI recorded a net inflow of $507 million in March, down 18.5% year-on-year, a performance still better than its 31.5% drop the previous month, the Bangko Sentral ng Pilipinas (BSP) reported on Friday.
That FDI remained on a net inflow indicated more investments were still entering than leaving the Philippines at a time the coronavirus disease-2019 (COVID-19) outbreak was sweeping across economies. For the entire first quarter, FDI net inflow registered at $1.67 billion, down 14.2% annually.
Broken down however, signs were already showing that investors were holding off from placing more funds in the Philippines. Funds that can be easily pulled out such as reinvestments and debt inflows plummeted even as equity or new FDI held up.
“It takes time to have new ones online and going. The ones that are already there can easily be deployed, borrowed or accessed, can easily be flipped when times turn quickly south like what the COVID-19 pandemic has done…,” said Ruben Carlo Asuncion, chief economist at UnionBank of the Philippines.
More specifically, reinvestment earnings dipped 37.9% annually to $57 million in March, figures showed. For the first three months, these inflows amounted to $187 million, down 24.1% on-year.
BSP data also showed that investments in debt instruments plummeted by a little more than a third in March to $278 million. From January to March, these inflows, which represent intercompany borrowings between local offices and their foreign headquarters, sank a faster 41% annually to $828 million.
Partially offsetting these declines were a rise in equity FDI, essentially new long-term investments that the Philippines wants to attract to generate more jobs. In March alone, equity inflows rose 53.1% to $296 million from same period a year ago.
For the entire first quarter, these inflows more than doubled to $653 million, figures showed. By country source, the bulk of investments came from the Netherlands, Japan and Singapore.
So far this year, equity inflows were mainly funneled to the manufacturing, administrative and support services, and property sectors, the central bank reported.
“I did expect a recovery of new FDI this 2020, and this rise may be momentum and sadly will be cut short come numbers of April until probably June,” Asuncion said in a text message.
The bleak outlook was already programmed by the BSP, who last week trimmed its net FDI projections to just $4.1 billion from the original $8.8 billion seen last November. The projection, if realized, would mark the third straight year of declining FDI inflows since peaking in 2017 at $10.26 billion.
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