May FDI net inflow smallest in 4 years

By Mark T. AmoguisSenior Researcher
MAY was marked by a net inflow of foreign direct investments (FDI) that was nevertheless the smallest in more than four years, the central bank reported on Tuesday.
FDI net inflows dropped 85.1% to $242 million in May from $1.625 billion in the same month last year, preliminary central bank data showed.
It was the smallest net inflow since March 2015’s $200 million.
The Bangko Sentral ng Pilipinas (BSP) noted that net investments in debt instruments contracted by 88.6% to $149 million in May “due mainly to higher prepayments and repayments of debt owed by local affiliates to their foreign counterparts, coupled with a decline in their borrowings from their foreign affiliates.
The BSP also noted “moderate” net inflows of equity capital, which plunged 99.6% to a mere $1 million that month, as placements declined 71% to $74 million while withdrawals surged nearly fivefold to $73 million.
The central bank said equity capital placements in May came mainly from the United States, Japan, China, Hong Kong.
In May, these capital infusions went largely to real estate; manufacturing; financial and insurance; construction; as well as human health and social work industries.
Reinvested earnings, meanwhile, went up 15.9% to $92 million.
YEAR-TO-DATE DROP
Year-to-date, FDI net inflows reached $3.145 billion in the five months to May, dropping 37.1% from the past year’s $5.002 billion.
This was mainly due to a 76% year-on-year drop in net equity capital investments to $336 million from $1.4 billion in the same comparative five month periods, as placements contracted by 48.9% to $787 million from $1.539 billion while withdrawals jumped more than threefold to $451 million from $139 million.
Net investments in debt instruments similarly decreased 26% year-on-year to $2.391 billion from $3.232 billion.
In the first five months, equity capital placements came from Japan, the US, China, Singapore, and South Korea and were largely channeled to the financial and insurance sector, real estate, manufacturing, transportation and storage, as well as administrative and support services.
FDIs are a source of capital for the Philippine economy, spurring domestic activity by funding business expansion and generating more jobs.
From a record high of $10.256 billion in 2017, FDI net inflows dropped 4.4% to settle at $9.802 billion last year.
The central bank projects net foreign direct investments to reach about $10.2 billion this year.