Net FDI inflows rise 1.8% to $8.5 B in Oct.

The country’s net foreign direct investment (FDI) inflows reached $8.5 billion as of endOctober 2018, up 1.8 percent compared to same time in 2017 of $8.4 billion, the Bangko Sentral ng Pilipinas (BSP) reported.

The BSP estimates FDI of $10.4 billion for 2018 which was more than actual 2017’s $10.1 billion. For this year, the forecast is $10.4 billion.

BSP Deputy Governor Diwa C. Guinigundo said they expect positive FDI numbers despite deficits in the balance of payments (BOP). FDI is part of the BOP financial accounts which is expected to incur a deficit of $1.3 billion in 2018 and $5.2 billion in 2019.

Overall, the BSP expects a higher BOP deficit of $5.5 billion for 2018 and $3.5 billion for this year. As of end-November 2018, the BOP shortfall was at $4.75 billion.

The current account, another BOP component, is expected to report a bigger shortfall of $6.4 billion in 2018, twice that of the projection of $3.1 billion made in mid-2018.

Guinigundo said it’s a matter of reading the data. “All of these downgrades in the current account should be assessed in terms of mitigants and financiability,” he said this week, before the FDI data release.

“The current account shortfall continues to derive from higher merchandise trade deficit on account of strong imports and weak exports. But among the mitigants of course we should talk about the additionality offered by remittances, tourist receipts and BPO revenues,” said Guinigundo.

He said financiability comes from FDI and foreign portfolio investments, both of which “remain robust and resilient through the business cycle.”

“We believe that as BBB (‘Build, Build, Build’) contributed to higher productive capacity, we should be seeing higher exports that would definitely address the current account deficit which normally arises during this particular cycle when the domestic economy continues to expand while domestic savings are not adequate to fund the required investments,” explained Guinigundo.