June fuels first-half FDI surge
NET INFLOWS of foreign direct investments (FDI) to the Philippines increased anew in June, helping to fuel a first-half surge that pushed the tally closer to an official full-year forecast, according to data the Bangko Sentral ng Pilipinas (BSP) released on Monday.
FDI net inflows reached $831 million for the month, up 9.2% from the $761 million which the country received in June 2017, even as the latest inflows were less than the $1.645 billion recorded in May.
FDI inflows spell more capital for the Philippine economy, fuelling business expansion that, in turn, generate more jobs and spurs overall domestic activity.
Investors remained bullish on the Philippine economy, as evidenced by the surge in equity placements compared to a year ago.
June saw the US Federal Reserve raise interest rates for a second time this year. Back home, the BSP also hiked rates by another 25 basis points for the second straight month in an effort to rein in inflation expectations amid signs that price pressures remain elevated.
June inflows brought the first-semester FDI tally to $5.755 billion, 42.4% more than the $4.041-billion investments received in 2017’s first six months.
“The continued inflows of FDI indicate investor confidence in the Philippine economy on the back of strong macroeconomic fundamentals and growth prospects,” the BSP said in a statement.
Net equity investments reached $184 million in June, turning around from the $67-million net outflows recorded in the same month last year.
Total inflows of equity capital reached $208 million in June, nearly double the $113 million placements a year ago. These inflows were partly offset by just $24 million in withdrawn capital, versus June 2017’s $180-billion outbound capital.
Multinational companies also chose to reinvest a bigger share of earnings drawn from their operations in the Philippines, growing the amount by 7.1% to reach $77 million from $72 million.
These additional flows were enough to offset smaller investments in debt instruments that dropped fourth to $569 million from $756 million the prior year.
One observer said the sustained FDI surge is good for the economy, as it fuels stronger activity particularly in terms of factory output.
“The preference over equity describes the continuing resurgence of manufacturing in the country. This manufacturing growth consequently relates to the government’s push for increasing government spending on infrastructure,” said Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines.
Strong FDI momentum also puts the country on track to hit the $9.2-billion forecast this year, coming from the record $10.049 billion tallied in 2017.
“In fact, at the rate it is growing, the 2018 FDI goal can be readily surpassed,” Mr. Asuncion added, noting that thirdquarter investments would be “crucial” to the full-year tally.
For June, the biggest sources of investments were Singapore, Luxembourg, Japan, the United States and the Netherlands, with such inflows going to manufacturing; electricity, gas, steam and air conditioning supply; real estate; financial and insurance; and wholesale and retail trade activities, the central bank said.
Market watchers have flagged that the planned overhaul of the local tax incentives regime could dampen investor appetite towards the Philippines, although the final form of the second tax reform package is yet to be passed by the Senate after the House of Representatives approved the same on third and final reading last night. Tax measures have to come from the House by law, although the Senate can conduct parallel public hearings while awaiting House approval in order to expedite enactment.