By Luisa Maria Jacinta C. Jocson, Reporter
NET INFLOWS of foreign direct investments (FDI) fell to their lowest level in over 4 years in September, data from the Bangko Sentral ng Pilipinas (BSP) showed.
The central bank on Tuesday reported FDI net inflows slumped by 36.2% to $368 million in September from $577 million in the identical month a 12 months ago.
This was also the bottom monthly FDI inflow in 53 months or because the $314 million recorded in April 2020. To recall, strict lockdowns to curb the spread of the coronavirus disease 2019 (COVID-19) were in effect in April 2020.
Month on month, net inflows likewise plunged by 54.8% from $815 million.
“The downturn in FDI net inflows in September 2024 was due largely to the decline in nonresidents’ net investments in debt instruments,” the BSP said.
Nonresidents’ net investments in debt instruments of local affiliates dropped by 32.8% to $277 million in September from $413 million a 12 months prior.
Net investments in equity capital apart from reinvestment of earnings plummeted by 91.2% to $7 million in September from $83 million a 12 months earlier.
Equity capital placements slid by 53.4% 12 months on 12 months to $82 million, while withdrawals dropped by 19.7% to $75 million.
By source, equity placements were mainly from Japan (60%), followed by the USA (25%), and Singapore (8%).
These were invested mostly in manufacturing (58%), real estate (19%), information and communication (8%), and wholesale and retail trade (5%).
Meanwhile, investments in equity and investment fund shares stood at $91 million in September, down by 44.6% from $164 million a 12 months ago.
Alternatively, reinvestment of earnings went up by 3.6% to $84 million in September from $81 million last 12 months.
NINE-MONTH FDI
For the primary nine months of the 12 months, FDI net inflows rose by 3.8% to $6.66 billion from $6.42 billion in the same period a 12 months ago.
Investments in equity and investment fund shares jumped by 20.4% to $2.3 billion within the period ending September from $1.91 billion a 12 months ago.
Net foreign investments in equity capital surged by 46.9% to $1.36 billion as of end-September from $923 million a 12 months ago.
This as equity capital placements climbed by 28.1% to $1.79 billion, while withdrawals dipped by 8.5% to $434 million.
Within the nine-month period, these placements mostly got here from the UK (43%), Japan (37%), the USA (9%), and Singapore (4%).
Meanwhile, foreign investments in debt instruments decreased by 3.3% to $4.35 billion within the January-September period from $4.5 billion.
Reinvestment of earnings dipped by 4.2% to $949 million as of end-September from $991 million a 12 months ago.
“The relatively lower FDI inflows could possibly be largely caused by a wait-and-see stance by some foreign investors while waiting for the CREATE MORE to be passed into law,” Rizal Business Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
In November, President Ferdinand R. Marcos, Jr. signed the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act, which expands fiscal incentives and lowers corporate income tax on certain foreign enterprises.
Mr. Ricafort also noted the “still relatively high” rates of interest, which can have weighed on foreign investments.
The BSP launched into its rate-cutting cycle in August this 12 months with a 25-basis-point (bp) rate cut. It later delivered one other 25-bp cut in October, bringing the important thing rate to six%.
“Persistently high global rates of interest, led by the US Fed have made emerging market investments just like the Philippines less attractive,” John Paolo R. Rivera, a senior research fellow on the Philippine Institute for Development Studies, said.
“Investors often prefer safe-haven assets in advanced economies under these conditions,” he added.
The US Federal Reserve kicked off its easing cycle with a 50-bp cut in mid-September.
Mr. Rivera also noted “heightened geopolitical tensions and economic uncertainties can have also further dampened investor confidence globally.”
“Likewise, slowing economic growth could have raised concerns amongst foreign investors. Economic growth was barely weaker than anticipated within the third quarter of 2024, which can have influenced investment sentiment,” he added.
The Philippine economy grew by weaker-than-expected 5.2% within the July-to-September period, its slowest growth in five quarters or because the 4.3% expansion within the second quarter of 2023.
“For the approaching months, the CREATE MORE law would now make international investors more decisive to locate within the country with higher incentives that might compete higher with other Asian countries,” Mr. Ricafort said.
Further rate cuts by the BSP and Fed would also increase demand for loans and attract more FDIs moving forward, he added.
The Monetary Board is about to have its final policy review on Dec. 19. BSP Governor Eli M. Remolona, Jr. has signaled the potential of reducing or keeping rates regular.
Meanwhile, Reuters reported that traders are pricing in an 86% probability of one other quarter-percentage-point rate cut from the Fed at its Dec. 17-18 meeting.
Alternatively, Mr. Ricafort flagged US President-elect Donald J. Trump’s protectionist trade policies.
“More protectionist policies by a Trump presidency starting in 2025 would discourage some US corporations from investing and creating more jobs outside the US, in addition to a possible trade war between the US and China or other countries that might decelerate the world economy and global trade,” he added.
Mr. Trump has pledged to slap an extra 10% tariff on Chinese goods in a bid to force Beijing to do more to stop the trafficking of chemicals used to make fentanyl, Reuters reported.
Mr. Trump has previously said he would introduce tariffs in excess of 60% on Chinese goods.
The BSP expects to record FDI net inflows of $10 billion this 12 months.
