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FDI net inflows hit 15-month high in February

Foreign direct investments (FDI) into the Philippines yielded higher net inflows in February on the back of increased fund infusions in debt instruments during the month, the Bangko Sentral ng Pilipinas (BSP) reported Wednesday.

Data released by the BSP showed that FDI net inflows amounted to $1.047 billion in the second month of the year, up 13% from $926 million in February 2022.

This is also higher than the $448 million net inflows recorded in January.

The latest figure is the highest in 15 months since the country saw $1.263 billion FDI net inflows in November 2022.

FDI can be in the form of equity capital, reinvestment of earnings, and borrowings.

“The increase in FDI was due to higher non-residents’ net investments in debt instruments, notwithstanding lower net equity capital placements and reinvestment of earnings,” the central bank said.

In an emailed commentary, Rizal Commercial Banking Corp. chief economist Michael Ricafort said that FDI net inflows in February is among highest since the pandemic started “as the economy further reopened towards greater normalcy with no more COVID restrictions compared to most of 2020-2021.”

The BSP said that the bulk of the equity capital placements during the month came from Japan, the United States, and the Cayman Islands.

The central bank said the investments were channeled mostly to the manufacturing; real estate; electricity, gas steam and air conditioning supply; and financial and insurance industries.

The year-to-date FDI net inflows stood at $1.5 billion, down 14.6% from $1.8 billion net inflows posted in the first two months of 2022.

“All major FDI components yielded lower net inflows as foreign investors remained cautious amid persistent and broadening global inflation,” the BSP said.

Investment Commitments

Nonetheless, Ricafort said that for the coming months, net FDIs could pick up further amid the investment commitments obtained by the Marcos administration from overseas trips in recent months.

“The latest investment commitments after the administration's official visit to the United States in May 2023 ($1.7 billion); state visit to Japan in early February 2023 with about $13 billion; investment commitments worth about $24.2 billion during President Marcos’ visit to China in early January 2023; these could lead to more US dollar/foreign currency inflows, especially in the form of FDI into the country, at the very least; though still wait-and-see for the actual investments to be made into the country in the coming months,” he said.

“These are on top of the earlier investment commitments estimated from foreign investors after the new administration's recent visits to the World Economic Forum, Belgium ($2.2 billion), Thailand ($4.6 billion), Indonesia ($8.4 billion), Singapore ($6.5 billion), and the US ($3.9 billion; the administration's first US visit in September 2022); yet to see if these would also translate to actual investments/FDI into the country,” he added. —VAL, GMA Integrated News