Foreign direct investments (FDI) fell 1% in May to $499 million from the $504 million inflows recorded in the same month a year ago, the Bangko Sentral ng Pilipinas (BSP) said.
"This decline emanated mainly from the 31.7% drop in nonresidents' net investments in equity capital (other than reinvestment of earnings) to $161 million from $235 million in May 2023," the BSP said.
It added, "Likewise, reinvestment of earnings decreased marginally by 3.7% to $97 million from $101 million. Meanwhile, nonresidents' net investments in debt instruments increased by 43.4% to $242 million from $169 million in May 2023."
The BSP said an FDI can take the form of equity capital, reinvestment of earnings, or borrowings.
The BSP said that Japan, the United States, and Hong Kong were the top sources of FDIs during the month. These were channeled primarily to manufacturing, real estate, arts entertainment, and the recreation industries.
For the first five months of the year, FDI net inflows grew by 15.8% to $4.0 billion from the $3.5 billion net inflows reported in January-May 2023. Top country sources include the United Kingdom, Japan, and the United States, and were channeled to manufacturing and real estate.
In a comment, Rizal Commercial Banking Corporation chief economist Michael Ricafort said the 1 percent decline in FDI net inflows in May was largely due to geopolitical risks, given the unprecedented direct attacks between Iran and Israel from April 1 to 20, 2024.
Ricafort said the FDI data were also weighed down in recent months by the still relatively high U.S. and local interest rates, which increased borrowing costs for global and regional investors and slowed down FDIs.
"Nevertheless, the Philippine economic growth is among the fastest in ASEAN, and long-term U.S. and local interest rates have already eased from the immediate highs since November 2023, thereby encouraging more FDIs to come into the country amid favorable demographics and lower long-term interest rates that help spur investments globally, including FDIs into the country," said Ricafort.
"For the coming months, possible cuts in the U.S. and local policy rates later in 2024 and in 2025, especially if inflation remains well anchored within the central bank's inflation target, could also lead to further pick up in FDIs eventually," he added.
Comments