September 11, 2024 | 12:00am
MANILA, Philippines — The net inflow of foreign direct investments (FDI) dropped by 29 percent to $394 million in June from $555 million in the same month last year, according to the Bangko Sentral ng Pilipinas (BSP).
This marked the lowest level of FDI in over four years, or since the $314 million in April 2020 at the start of the COVID pandemic.
“The decline resulted from lower net inflows across all major FDI components,” the central bank said.
BSP data showed the net investments in debt instruments fell by 30 percent to $213 million in June from $304 million in the same period last year as foreign companies settled more debt.
Investments in debt instruments consist mainly of intercompany borrowing between foreign direct investors and their subsidiaries in the Philippines. The rest are investments made by non-resident subsidiaries in their resident direct investors.
Foreign investments in equity capital decreased by 33.2 percent to $74 million in June from $111 million a year ago. Reinvestment of earnings also declined by 23.4 percent to $107 million from $140 million.
Equity capital placements came from Japan, the United States, Sweden and Singapore. These were channeled mainly to manufacturing, real estate, wholesale and retail trade as well as financial and insurance industries.
On the other hand, withdrawals plunged by 39.3 percent to $13 million in June from $21 million in the same month last year.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said higher borrowing costs continued to weigh on investments globally.
Some investors are also adapting a wait-and-see approach amid geopolitical tensions in the Middle East and on the West Philippine Sea.
“Some international investors (are assessing) if there would be risk of war/conflict between China and the Philippines before investing billions of pesos or dollars into the country as a matter of prudence and as part of due diligence for investments globally,” he said.
The net FDI inflow stood at $4.44 billion in the first half of the year, 29 percent lower than the $4.11 billion in the same period last year.
The net investments in debt instruments, the BSP said, went down by 3.4 percent to $2.73 billion from $2.82 billion. Equity capital surged by 62 percent to $1.2 billion from $739 million a year prior.
Equity placements rose by 57.9 percent to $1.46 billion from January to June compared to $923 million in the same period last year, while withdrawals climbed by 41.5 percent to $261 million from $184 million.
Reinvestment of earnings declined by 6.7 percent to $514 million from $550 million.
“For the coming months, further cuts on BSP and the US Fed rates amid easing inflation trend would further reduce borrowing costs that would help spur greater global investments,” Ricafort said.
The BSP expects FDI net inflows at $9.5 billion this year and $10.5 billion by 2025.
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