Foreign direct investments net inflows reach $907M in January, up 89.9% —BSP

The inflows of foreign direct investments (FDI) saw an increase in the first months of 2024 due to improved investor appetite on the Philippine economy, data released by the Bangko Sentral ng Pilipinas (BSP) showed.

The BSP reported that FDI in January yielded net inflows of $907 million, up 89.9% from $478-million net inflows recorded in the same month last year.

FDI refers to the flow of capital or investments in one country held by investors in another country, representing international expansion activities.

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

The central bank’s FDI statistics are distinct from the investment data of other government sources as it covers actual investment inflows, while the approved foreign investments data published by the Philippine Statistics Authority (PSA), sourced from investment promotion agencies (IPAs), represent investment commitments or pledges which may not necessarily be realized fully in a given period.

Sought for comment, Rizal Commercial Banking Corp. chief economist Michael Ricafort said the year-on-year improvement in FDI in January “may have to do with improved economic and financial markets performance in recent months, such as the easing headline inflation trend into the central bank targets that could support/justify Fed rate cuts and local policy rate cuts later in 2024.”

“Philippine economic growth is among the fastest in ASEAN/Asia and long-term US and local interest rates already eased from the immediate highs since November 2023, thereby encouraging more FDIs to come into the country amid favorable demographics and lower long-term interest rates/borrowing costs that help boost investments globally, including FDIs into the country,” Ricafort said.

The economist said the increase in FDI could have also partly been brought about by some realized investment commitments made for more than a year already during the various foreign trips of the administration.

The BSP said the increase in FDI in January was supported mainly by the 173.2% growth in foreigners’ net investments in debt instruments to $820 million from $300 million in January 2023.

Meanwhile, foreigners’ reinvestment of earnings also grew by 16.4% to $99 million from $85 million year-on-year.

Foreigners’ net investments in equity capital, apart from reinvestment of earnings, saw net outflows of $11 million in January from the $93 million net inflows a year earlier.

The top country sources of capital are Japan and the United States, accounting for 69% and 19% of investments.

The BSP said the top industries for FDI are manufacturing, real estate, construction, and wholesale and retail trade industries.

“For the coming months, possible cuts in the US/global/local policy rates later in 2024, if inflation remains well anchored within the inflation target of the central bank, could also lead to some pick-up in FDIs eventually… amid Philippine GDP growth that is still among the fastest in ASEAN/Asia would help boost investments/FDIs, as a new bright spot for the local economy and major source of additional jobs/employment, business activities, and other economic opportunities for the country,” Ricafort said.—AOL, GMA Integrated News