FDI inflows drop to 3-year low in Sept.

FDI inflows drop to 3-year low in Sept.

By Keisha B. Ta-asan, Reporter

NET INFLOWS of foreign direct investments (FDI) slumped to the lowest level in over three years in September, as the uncertain global economic environment dampened investor sentiment.

Data released by the Bangko Sentral ng Pilipinas (BSP) on Monday showed FDI net inflows plunged by 42.2% to $422 million in September from $731 million in the same month in 2022.

This was also 46.5% lower than the $790-million FDI net inflows in August.

The September figure was the lowest monthly net inflow of FDI in over three years, or since the $314 million in April 2020 at the height of the coronavirus disease 2019 (COVID-19) pandemic lockdowns.

Security Bank Corp. Chief Economist Robert Dan J. Roces attributed the FDI slump in September to global economic uncertainties such as possible recessions and trade disputes.

“Domestic policy shifts, and currency fluctuations have further dampened confidence. Challenges in key sectors and the attractiveness of other regions also play a role,” he said in a Viber message.

BSP data showed all major FDI components posted a decline in net inflows in September.

Nonresidents’ net investments in debt instruments of local affiliates fell by 47.8% to $238 million in September from $456 million in the same month in 2022.

Meanwhile, investments in equity and investment fund shares slid by 33.1% to $184 million in September from $275 million a year ago.

Reinvestment of earnings also slipped by 9.9% year on year to $79 million in September.

Nonresidents’ net investments in equity capital (other than reinvestment of earnings) also declined by 43.9% to $105 million in September from $187 million in the same month last year.

Broken down, equity capital placements slumped by 25.2% to $172 million, while withdrawals climbed by 57% to $67 million.

The equity placements were mainly from Japan, Singapore, and the United States, and invested mostly in financial and insurance, construction, manufacturing, and other industries.

“Net FDI inflow in September was the lowest since April 2020, indicating the continued impact of a challenging global economic environment on investor sentiment,” China Banking Corp. Chief Economist Domini S. Velasquez said in a Viber message.

For the first nine months of the year, FDI net inflows dropped by 15.9% to $5.9 billion from $7 billion in the comparable year-ago period.    

“FDI declined on the back of persistent global economic uncertainties, which continued to affect investor decisions,” the central bank said.

BSP data showed foreign investments in debt instruments declined by 17.2% year on year to $4.06 billion in the January-to-September period.

Investments in equity and investment fund shares also dropped by 12.9% to $1.8 billion in the nine-month period.

Net foreign investments in equity capital went down by 18.5% to $945 million. Equity capital placements inched up by 2.7% to $1.39 billion, while withdrawals surged by 126.5% to $448 million.

Most of these placements were from Japan, Singapore, the United States, and Germany.

Reinvestment of earnings dipped by 6.1% to $869 million in the January-to-September period.

Ms. Velasquez said that if economic conditions improve in 2024, net FDI inflows may improve.

“The country’s favorable growth prospects and the government’s efforts to attract investors such as trade liberalization reforms and overseas roadshows, could also contribute to boosting investor sentiment,” she said.

Ms. Velasquez said the government can still improve infrastructure and the ease of doing business in the Philippines in order to make the country more competitive in attracting investments.

“Moving forward, the Philippines’ FDI outlook hinges on global economic recovery, consistent domestic policies, strong economic performance, and a more competitive regional stance,” Mr. Roces said.

The BSP expects FDI net inflows to end the year at $8 billion.