FDI inflows fall to $ 566M in Sept
NET foreign direct investments ( FDI) dropped to $566 million in September from the figure posted in the same month last year, which an analyst traced to investors’ uncertainty about the government’s second comprehensive tax reform package.
Bangko Sentral ng Pilipinas (BSP) data released on Tuesday showed that the amount was a 2.9-percent decrease from $582 million a year ago, which the central bank attributed to “the decline in non-residents’ net investments in debt instruments.”
Net inflows in debt instruments, or lending by foreign companies abroad to their local affiliates to fund existing operations and expansion efforts, slid by 36 percent to $ 395 million in September from the year-earlier $618 million, the Bangko Sentral said.
“However, the reversal of net equity capital investments from net outflows to net inflows mitigated the decrease in net investments in debt instruments,” it added.
Equity capital investments registered net inflows of $96 million in September, a reversal of the $117-million net outflows a year ago.
Placements increased by 79.5 percent to $ 125 million, while withdrawals declined by 84.8 percent to $28 million.
Equity capital placements in the month mostly came from Japan, Taiwan, the United States, Hong Kong and The Netherlands. These were largely invested in the financial and insurance, manufacturing, and real estate industries.
Reinvested earnings declined by 9.4 percent to $74 million from $82 million in the same month in 2018.
Commenting on the data, ING Bank Manila senior economist Nicholas Antonio Mapa said “[w] ould-be investors may want to see the final print of the Citira (Corporate Income Tax and Incentives Rationalization Act) bill, which entails a lowering of the corporate tax and rationalization of fiscal incentives, before actually deciding to invest.”
“[P]rospective players simply need more clarity on the matter and are not necessarily opposed to the” measure, he added.
‘Prolonged trade disputes’
The September figure dragged the year-to-date tally to $5.11 billion, down 36.9 percent from the amount recorded in the first nine months of 2018.
“The slowdown in inflows reflected the adverse effects of… prolonged trade disputes, which continued to affect global growth negatively and prompted foreign investors to hold off their investment plans in emerging markets, including the Philippines, until the global growth outlook improves,” the Bangko Sentral said.
Consequently, it added, non-residents’ net investments in debt instruments declined by 32.6 percent to $3.74 billion and equity capital by 66.7 percent to $632 million.
Net equity capital investments decreased as placements dipped by 45.7 percent to $1.23 billion, while withdrawals soared by 58.7 percent to $607 million.
Equity capital infusions in the period came mainly from Japan, the United States, Singapore, China and South Korea. These were put in the financial and insurance, real estate, and manufacturing sectors.
Meanwhile, reinvestment of earnings grew to $746 million in the nine-month period from $663 million a year ago.
The BSP expects net FDI inflows to reach $10.2 billion this year.
In 2018, net FDI inflows hit a two- year low of $ 9.802 billion — short of the central bank’s $10.4-billion goal and the lowest since 2016’s $7.933 billion — and down 4.4 percent from 2017’s $10.256 billion.