Philippines: FDI inflow soars by 64% in May

As foreign firms pump additional equity into local units

MANILA, Philippines — The net inflow of foreign direct investments (FDI) soared by 64.1 percent to   $742 million in May from $452 million in the same month last year as multinational companies continued to inject more money into their affiliates in the Philippines to finance their operational requirements, according to the Bangko Sentral ng Pilipinas.

BSP data showed the net investments in debt instruments almost doubled to $544 million in May from $282 million in the same month last year as foreign companies pumped additional investments into the local affiliates.

Likewise, equity capital placements from Japan, the US, Singapore and the Netherlands, channeled mainly to manufacturing, real estate, information and communication, as well as transportation and storage industries went up by 25 percent to $104 million in May from $83 million a year ago.

On the other hand, withdrawals plunged by 40.5 percent to $13 million in May from $21 million in the same month last year.

The BSP data also showed that reinvestment of earnings slipped by two percent to $106 million from $108 million.

“In May 2022, FDI grew following net inflows from non-residents’ net investments in debt instruments and equity capital of their local affiliates,” the BSP said.

From January to June, the Philippines recorded an 18.8-percent increase in net FDI inflow to $4.12 billion from $3.51 billion in the same period last year.

The net investments in debt instruments jumped by 42.7 percent to $3.13 billion from $2.19 billion, erasing the 31.3 percent plunge in capital infusion to $607 million from $885 million.

“The year-to-date growth was mainly on account of the increase in non-residents’ net investments in debt instruments, which muted the decline in net equity capital placements other than reinvestment of earnings,” the central bank said.

Equity placements fell by 34.2 percent to $679 million from January to May compared to $1.03 billion in the same period last year, while withdrawals plunged by 51.4 percent to $72 million from $148 million.

Data also showed the reinvestment of earnings was almost unchanged at $435 million from $434 million.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the net FDI inflow in May was the lowest in two months or since the $727 million recorded in March as investors took the wait-and-see stance ahead of the outcome of the May national elections.

Ricafort said the inflow was still among pre-pandemic highs as the lockdown in Metro Manila and more areas eased and even relaxed further to the lowest Alert Level 1 since March and some increased borrowings to finance more investments to better hedge amid the rising interest rates.

Among the offsetting risk factors, Ricafort named the following: the adverse economic effects of the Russia-Ukraine war that led to elevated global commodity prices and inflation, more aggressive US Federal Reserve rate hikes, and higher global interest rates, which could be the risk factors for the FDI data in the coming months.

The BSP expects the FDI inflow to rise by 4.8 percent to a record high of $11 billion this year from $10.5 billion last year. The level is seen rising further to a new all-time high of $11.8 billion next year.