Foreign direct investment up 32% in August — BSP

Foreign Direct Investment (FDI) continued to register net inflows after rising by 32 percent in August, data released by the Bangko Sentral ng Pilipinas (BSP) on Thursday showed.

A measure of investment by foreign companies or individuals in a country and a key source of employment and capital for the domestic economy, the FDI registered $711 million in net inflows in August, up from $539 million year-on-year.

“This is on account of the 44.2 percent increase in investments in debt instruments (or intercompany borrowings) to $636 million from $441 million in August 2015,” the BSP said in a statement.

The increase in investment in debt instruments “more than compensated” for the decline in net equity capital investment at $8 million from $37 million.

The bulk of gross equity capital placements was mainly from the United States, Singapore, the Netherlands, Japan, and Hong Kong. These were channeled mainly to real estate, manufacturing, wholesale and retail trade, as well as electricity, gas, steam and air-conditioning supply, and arts, entertainment and recreation activities.

In the eight months to August, FDI net inflows were up 71.1 percent at $5.4 billion.

“The sustained FDI inflows were buoyed by investors’ confidence in the economy on the back of the country’s sound macroeconomic fundamentals,” the BSP said. Reinvested earnings totaled $513 million.

Moving forward, Cid Terosa, dean of the School of Economics of the University of Asia and the Pacific, said growth may not be sustained in the long run.

“I believe growth will be tempered by global economic developments, particularly the possible rise in interest rates in the US,” he said in a text message.

The Federal Open Market Committee (FOMC) is scheduled to hold its last policy meeting on December 13 and 14 to decide whether or not to raise interest rates in the US.

A report by Reuters, however, noted the recent victory of Donald Trump could spur economic fears and in turn discourage the Fed to raise rates.

“Investors fear his victory could cause global economic and trade turmoil and years of policy unpredictability, which among other things could discourage the Federal Reserve from raising interest rates in December as long expected,” it said. — VDS, GMA News