’18 FDI INFLOWS AT $9.8B, DOWN BY $500M

FOREIGN direct investments (FDI) to the Philippines fell short of the government’s projection of $10.4 billion for 2018, as fewer investors placed their bets on the long-term economic prospects of the country.

The Bangko Sentral ng Pilipinas (BSP) on Monday reported a 4.4-percent drop in the country’s FDI level in end-2018 compared to the previous year’s FDI. Last year, total FDI net inflow into the Philippines reached $9.8 billion, lower than the $10.3 billion recorded in 2017.

The 2018 FDI print is also $600 million short of the government’s projection of $10.4 billion for the year.

FDI is the type of investment that is often more coveted, as it stays longer in the economy and creates job opportunities for locals. It is also not easily pulled out of the market unlike its shorter-term counterpart, the foreign portfolio investments.

Across components, net equity investments posted the largest decline at 33.3 percent. Although there were less withdrawals during the year, placements also declined by about a third from those seen in 2017.

Asian in nature

COuNTRy source data showed that FDI are increasingly becoming Asian in nature, as placements made by investors based in the united States, Europe and Australia all posted declines during the year.

In particular, net equity placements made by investors in the uS declined by 66.07 percent, while those from Europe were down by 80.76 percent. Investments from Australia and New Zealand further plunged into the net outflow territory to hit a net outflow volume of $149.25 million, from the $2.84 million net outflow in the previous year.

These were partially offset by the growth in FDI from Asian countries—particularly from Southeast Asian countries which posted a 36.42-percent growth in equity placements, as well as from South Korea, Hong Kong and Taiwan which collectively grew their placements to the Philippines by 132.44 percent year-on-year. The rest of Asia grew their FDI to the Philippines by 90.72 percent—led by China with a 590-percent annual expansion in the 2018 FDI.

These equity investments were channeled primarily to manufacturing, financial and insurance, real estate, electricity, gas, steam and air-conditioning supply, and arts, entertainment and recreation industries.

For the other subcomponents of the FDI, reinvestment of earnings also declined slightly by 0.4 percent to $859 million in 2018, from $863 million in 2017.

By contrast, net availment of debt instruments—consisting mainly of intercompany borrowings/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines—rose by 11.3 percent to $6.7 billion in 2018 from $6 billion in 2017.

For December alone, FDI declined by 4.8 percent to hit $677 million net inflows from the $712-million net inflows in December last year.