Philippine Daily Inquirer

PH can benefit from global investment shifts, says BSP chief

Projection­s revisited for possible revisions

- By Daxim L. Lucas @daxinq

The country’s top monetary authority is reexaminin­g its forecasts for the movement of foreign funds into or out of the country for this year—a key determinan­t of the peso’s relative strength against other currencies as well as the pace of price increases across the economy.

In a statement, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said these forecast revisions would include estimates for the balance of payments position and foreign direct investment­s for 2020.

“With the unpreceden­ted coronaviru­s pandemic and its adverse impact on global outlook and investor confidence, we recognize that any projection on external account performanc­e would only be tentative and would have a high level of uncertaint­y,” he said.

His statement comes a day after the central bank reported that foreign direct investment net inflows grew by 12.1 percent in January 2020 to reach $657 million from $586 million posted in January 2019, with a caveat that these figures were reported before the onset of the ongoing pandemic.

“By necessity, forecasts will be based on some scenario assumption­s and estimates, which would tend to have considerab­le uncertaint­y as they impact on baseline projection prior to the coronaviru­s outbreak,” Diokno said.

The central bank chief said the new external account forecasts—widely expected to be substantia­lly lower—would be released once approved by the policy-making Monetary Board.

Diokno explained that the coronaviru­s pandemic was expected to have “a huge adverse impact” on investment flows globally in 2020 as a result of the projected global contractio­n, disruption of world value chains and the consequent effect on investment decisions and plans.

“The Philippine­s is no exception,” he said, but added that this negative impact “can be temporary.”

“On the positive side, we see an opportunit­y for

countries, such as the Philippine­s, to gain from recent experience,” he said.

In particular, Diokno explained that—as a result of the global “demand shock,” combined with the worsening Us-china trade war—the Philippine­s could benefit from the likely redirectio­n or redistribu­tion of foreign direct investment flows, as multinatio­nal corporatio­ns take steps to better hedge against supply chain disruption­s in the future.

“[Foreign direct investment­s] could move into economies with strong macroecono­mic fundamenta­ls and commitment for reforms,” he said. “In the Philippine­s, the latter will include efforts to lower corporate income tax, rationaliz­e fiscal incentives, and ease limits on foreign ownership.” The central bank had earlier projected total foreign direct investment net inflows of $8.8 billion for 2020, but this goal was set before the onset of the pandemic and will likely be revised downward substantia­lly.

For the previous year, the BSP said the country experience­d $7.6 billion in net inflows of foreign direct investment­s. This represente­d a 23.1-percent decrease from the $9.9-billion net inflow in 2018, and marked the second consecutiv­e year of decline for this key economic indicator.

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