Net FDI Declined 19.6% In Q1

The country’s net foreign direct investments (FDI) decreased by 19.6 percent to $2.042 billion as of end-March from $2.542 billion same time in 2022, based on Bangko Sentral ng Pilipinas (BSP) data.

Photo Insert: Based on BSP numbers, for the month of March, net FDI inflows decreased by 30.7 percent to $548 million compared to $792 million same time last year.

All FDI components such as equity capital, reinvestment of earnings, and borrowings all decreased at the end of the first quarter. Based on BSP numbers, for the month of March, net FDI inflows decreased by 30.7 percent to $548 million compared to $792 million same time last year. This could be due to “investor concerns over subdued global growth prospects,” said the BSP.

The BSP did not comment any further on why cumulative net FDIs declined since it has stopped explaining why this was so, unlike in previous statements in the past when they include a commentary for the public’s interest.

In March, net debt instruments were lower by 37.2 percent to $389 million versus $620 million in 2022 while reinvestment of earnings and net equity other than reinvestment of earnings also declined by 0.1 percent and 11.7 percent respectively, to $65 million and $94 million.

During the first three months, funds mostly came from investors in Singapore, Japan and the US. About 27 percent of investments went into manufacturing, while 26 percent were in the information and communication sector. Another 23 percent in the real estate industry.

On a cumulative basis, net debt instruments decreased by 22.1 percent to $1.579 billion compared to $2.027 billion last year. The reinvestment of earnings also declined by 0.7 percent to $202 million while net equity other than reinvestment of earnings fell by 15.9 percent to $261 million.

The January-March FDIs were also from investors in Japan, Singapore and the US, and 39 percent of the funds were invested in the manufacturing sector. FDIs announced by BSP are actual investment inflows, unlike other FDI statistics from other government data.

The BSP defines FDIs as an investment by a non-resident direct investor in a resident enterprise, whose equity capital in the latter is at least 10 percent. It also includes an investment made by a non-resident subsidiary or associate in its resident direct investor. The BSP forecasts net FDI will climb back to about $11 billion by end-2023.

Last year, net FDI decreased by 23 percent year-on-year to $9.2 billion from $11.98 billion in 2021. The BSP, the International Monetary Fund (IMF), and other central banks in Asia are working to improve regional systemic risk management amid current global challenges, especially to financial stability.

BSP Governor Felipe M. Medalla has said that systemic risk management and discussions to prepare Asian central banks for any emerging external threats to financial systems in the region are crucial at this point.

Basically, the BSP and the IMF are hoping Asia can find a way to ensure a collective solution to financial stability issues, post-pandemic. Asia contributes about 70 percent of world growth or output for 2023. Medalla said the current economic and financial sector environment “poses a different set of challenges for the authorities as well as the market”.

For the IMF, the “rapid rise in interest rates and anticipated slowing of economic activity to put inflation on a downward path have, together with supervisory and regulatory gaps and the materialization of bank-specific risks, contributed to stresses in parts of the financial system, raising financial stability concerns.”

Among countries in the ASEAN trade bloc, the Philippines’ projected real gross domestic product (GDP) growth of six percent for 2023 is the highest in the region, according to the latest IMF World Economic Outlook report. This was still lower compared to the 7.6 percent local GDP growth in 2022.

The IMF expects global growth of 2.8 percent in 2023 versus the estimated 3.4 percent in 2022. Meanwhile, growth in the ASEAN-5 countries – the Philippines, Indonesia, Malaysia, Singapore and Thailand -- is seen to grow at a slower pace of 4.5 percent in 2023 from the emerging 2022 growth of 5.5 percent.

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