FDI net inflows fell to 16-month low in May

Inflows of foreign direct investments (FDI) to the Philippines fell to a 16-month low in May amid global investors’ risk aversion due to geopolitical development, according to data released by the Bangko Sentral ng Pilipinas (BSP).

Central bank data showed that FDI into the country yielded inflows of $499 million, down 1% from $504 million in May 2023.

This is the lowest FDI net inflows posted since January 2023, when FDI net inflows stood at $478 million.

In an emailed commentary, Rizal Commercial Banking Corp. chief economist Michael Ricafort said the decrease in FDI in May was seen “after height of risk aversion largely brought about by the geopolitical risks in view of the unprecedented direct attacks between Iran and Israel from April 1-20, 2024.”

Ricafort, nonetheless, said a possible -0.25 basis point rate cut by the US Federal Reserve as early as September 18, 2024 “would also help in the recovery of FDIs from the point of view of locators/principals; as lower interest rates fundamentally tend to help improve both local and foreign investments/FDIs.”

The BSP said that the decline in FDI in May “emanated mainly from the 31.7% drop in nonresidents’ net investments in equity capital to $161 million from $235 million in May 2023.”

Reinvestment of earnings decreased marginally by 3.7% to $97 million from $101 million. 

Foreigners’ net investments in debt instruments, meanwhile, increased by 43.4% to $242 million from $169 million in May 2023.

The BSP said equity capital placements during the reference month originated mostly from Japan, the United States, and Hong Kong. 

The central bank added that investments were channeled largely to the manufacturing, real estate, and arts, entertainment, and recreation industries.

Year-to-date, FDI net inflows stood at $4 billion, up 15.8% from $3.5 billion net inflows seen in January to May 2023.—AOL, GMA Integrated News