MANILA, Philippines (Corrected, March 10, 2023, 12:13 p.m.) — Foreign direct investments in the Philippines continued to soften in November, reducing the government’s chances of hitting its full-year target.
Data released by the Bangko Sentral ng Pilipinas showed FDIs amounted to net inflows of $793 million in November, plunging 43.6% year-on-year.
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FDIs slipped 13.4% in the first 11 months, totaling a haul of $8.4 billion. FDIs represent firmer commitments from foreign investors that generate jobs for Filipinos unlike the so-called “hot money”, which enters and leaves markets with ease.
The BSP projected the Philippines would rack up $8.5 billion in net FDI inflows in 2022, a watered-down goal that was lower compared to the actual $12.4 billion net inflows generated in the preceding year.
Nicholas Antonio Mapa, senior economist at ING Bank in Manila, attributed the decline to the gloomy global economic outlook.
“The decline in FDI reflects fading investor sentiment possibly because of growing concerns about a global slowdown. In the coming months we’ll see whether the numerous investment pledges made during several state visits translate into actual investment flows,” he said in a Viber message.
President Ferdinand Marcos, Jr. fancied himself a jet setter in his first year in power jotting numerous state visits which include an appearance in the World Economic Forum meeting in Switzerland.
His delegation is currently in Japan for a state visit, which Malacanang said resulted in a sizeable number of investment pledges.
READ: Marcos to bring home 35 investment pledges from first state visit to Japan
Domini Velasquez, chief economist at China Banking Corp., agreed with Mapa’s assessment.
“Additionally, greater competition from other ASEAN countries could have also contributed to the lower print. Moving forward, the government needs to do more in attracting FDI. Aside from wooing investors, solid structural reforms are needed to improve the country's investment climate,” she said in a Viber message.
Data broken down showed that equity capital placements, a measure of new FDIs, advanced 47.3% year-on-year to $195 million in November.
Inflows benefitted largely from a boost in intercompany borrowings between multinational companies and their local affiliates. Despite this, the BSP reported a 55.2% year-on-year plunge in debt instruments to $540 million during the month.
Reinvestment of earnings skidded 12.6% on-year to $73 million in November.
“On a positive note, Chinese reopening could be positive for the country's FDI outlook. News from the President's trip in Japan seems to provide more details that could have a higher probability of panning out,” Velasquez added.
Editor's note: A previous version of this article erroneously reported the BSP's FDI target for 2022. This has been amended to reflect the correct figures. We apologize for the error.