FDI inflow down to $4.7 billion in 7 months

MANILA, Philippines — The inflow of foreign direct investments (FDI) declined by 14.7 percent to $4.66 billion from January to July compared to $5.47 billion in the same period last year on concerns over slowing global growth, according to the Bangko Sentral ng Pilipinas (BSP).

The amount of FDI entering the Philippines during the seven-month period declined despite the nearly 36-percent jump in inflows to $753 million in July from $555 million in the same period last year.

Latest data showed that investments in debt instruments consisting mainly of intercompany borrowing between foreign direct investors and their subsidiaries or affiliates in the Philippines decreased by 15 percent to $3.28 billion from January to July compared to last year’s $3.87 billion.

Total reinvestment of earnings also declined by 13 percent to $573 million from $517 million.

The BSP said equity other than reinvestment of earnings likewise contracted by 14 percent to $808 million from $940 million.

Equity infusions from Japan, Germany, the US and Singapore slipped by four percent to $1 billion from $1.05 billion. The inflows were channeled into manufacturing (54 percent), real estate (15 percent) as well as financial and insurance (10 percent).

The BSP also said that equity withdrawals jumped by 83 percent to $196 million in the first seven months from $107 million in the same period last year.

For July alone, investments in debt instruments more than doubled to $575 million from $276 million a year ago, fueling the sharp rise in FDI inflow for the month.

Equity placements from Japan, the US and Singapore plunged by 47.6 percent to $81 million from $155 million, while withdrawals declined by 9.1 percent to $16 million from $18 million.

Reinvestment of earnings also fell by 20.1 percent to $114 million in July from $142 million in the same month last year.

“FDI declined amid concerns over slowing global growth,” the BSP said.

In 2022, the Philippines managed to exceed its FDI inflow target of $8.5 billion despite the 23 percent plunge in net inflow to $9.4 billion from an all-time high of $11.98 billion in 2021.

The BSP further lowered its FDI projections to $8 billion from the original target of $9 billion for this year and to $10.5 billion from the previous forecast of $11 billion for next year.

In its October 2023 World Economic Outlook, the International Monetary Fund (IMF) sees global gross domestic product (GDP) growth slowing to three percent this year and further to 2.9 percent next year from 3.5 percent in 2022.

“The global economy continues to recover slowly from the blows of the pandemic, Russia’s invasion of Ukraine and the cost-of-living crisis. In retrospect, the resilience has been remarkable,” the IMF said.

Despite the disruption in energy and food markets caused by the war, and the unprecedented tightening of global monetary conditions to combat decades-high inflation, the multilateral lender said the global economy has slowed, but not stalled.

“Yet growth remains slow and uneven, with growing global divergences. The global economy is limping along, not sprinting. Global activity bottomed out at the end of last year while inflation – both headline and underlying (core) – is gradually being brought under control,” it said.

The IMF pointed out that a full recovery toward pre-pandemic trends appears increasingly out of reach, especially in emerging market and developing economies.

For the Philippines, the IMF penned a GDP growth of 5.3 percent for 2023 and 5.9 percent for 2024. The country’s GDP growth accelerated to 7.6 percent in 2022 after emerging from the pandemic-induced recession with a 5.7-percent expansion in 2021 from a 9.5 percent contraction in 2020.

However, the economy further slowed to 4.3 percent in the second quarter from 6.4 percent in the first quarter due to the impact of higher interest rates and slower government spending. The GDP expanded by 5.3 percent in the first half of the year, well below the government’s six to seven percent target.

IMF Resident Representative Ragnar Gudmundsson said the GDP growth projections for the Philippines have been updated to 5.3 percent for this year and to six percent for 2024.