BSP: Foreign direct investments recovered by 42.4% to $399-M net inflow in May

Foreign direct investments (FDI)—investments made by foreign companies or individuals in the Philippines— saw a recovery in May as easing of restrictions during the period allowed inflows of FDIs to pick up, the Bangko Sentral ng Pilipinas (BSP) reported Wednesday.

Data released by the BSP showed FDI stood at a net inflow of $399 million, up 42.4% from $280 million in the same period last year.

The double-digit FDI growth in May was a reversal from the 67.9% decline to $311-million net inflow in April

“The positive growth represents a reversal from the last three consecutive months of decline attributed largely to the weak global outlook and investors’ confidence following the pandemic,” the central bank said.

“The stronger FDI performance during the month relative to the level last year was on account of the increase in non-residents’ net investments in equity capital and debt instruments,” it said.

The 42.4% net FDI inflows in May reduced the cumulative decline in the January to May level to 25.6% from a contraction of 32.1% posted in the first four months of 2020.

Sought for comment, Rizal Commercial Banking Corp. chief economist Michael Ricafort said disruptions in supply chains and constraints in logistics locally and worldwide have already started to ease since the latter part of May, “thereby allowing the pickup in FDIs.”

“FDIs could further pick up in the coming months with the further reopening of economies locally and worldwide well into June onwards,” Ricafort said.

“Improved credit ratings of the Philippines in recent months could fundamentally help attract more foreign investments into the Philippines,” he said.

In May, the debt watcher Fitch Ratings has affirmed the Philippines’ credit rating of “BBB,” reflecting the country's fiscal and external buffers, including a lower government debt-to-GDP ratio compared with its peers. 

The Japan Credit Rating Agency (JCR), meanwhile, upgraded the country’s credit rating from "BBB+" to "A-" with a "stable" outlook.

In particular, the BSP said net investments in debt instruments grew by 40.8% to $236 million in May from $168 million year-on-year.

Equity capital placements, likewise, increased by 8.1% to $80 million from $74 million, while withdrawals decreased by 96% to $3 million from $73 million year-on-year.

The central bank said equity capital infusions in May came largely from Japan, Singapore, and the United States – economies which implemented gradual easing of containment measures.

“These were invested mostly in manufacturing, financial and insurance, and real estate industries,” it said.

Reinvestment of earnings during the month, however, continued to be weak as it dipped by 23.7% to $85 million from $111 million last year.

For January to May, equity capital placements mostly originated from the Netherlands, Japan, and Singapore. The said investments were channeled largely to manufacturing, real estate, and administrative and support service industries. — Ted Cordero/RSJ, GMA News