Net inflows of foreign direct investments fell 34 percent in May to $488 million from $739 million a year ago, as elevated inflation and higher interest rates impacted investors’ sentiments globally, the Bangko Sentral ng Pilipinas said Thursday.
It said in a statement the decline in FDI net inflows reflected the 70.7-percent contraction in non-residents’ net investments in debt instruments to $161 million from $551 million in the same month last year.
Non-residents’ net investments in equity capital, other than reinvestment of earnings, increased 158.7 percent to $235 million from $91 million in May 2022.
“FDI remains subdued due to the effects of relatively higher price and interest rate levels globally,” the BSP said.
It said equity capital placements in May came mostly from Germany, Japan and the United States. These were invested largely in the manufacturing and real estate industries.
Net FDI inflows in the first five months also shrank 20.8 percent to $3.4 billion from $4.3 billion a year ago.
The BSP statistics on FDIs are compiled based on the Balance of Payments and International Investment Position Manual, 6th Edition. They include investment by a non-resident direct investor in a resident enterprise, whose equity capital in the latter is at least 10 percent and investment made by a non-resident subsidiary/associate in its resident direct investor.
FDIs can be in the form of equity capital, reinvestment of earnings and borrowings.
The BSP FDI statistics are distinct from the investment data of other government sources. BSP FDI covers actual investment inflows. By contrast, the approved foreign investments data that are published by the Philippine Statistics Authority, which are sourced from investment promotion agencies, represent investment commitments which may not necessarily be realized fully, in a given period.
The PSA data are also not based on the 10-percent ownership criterion under BPM6. Meanwhile, the BSP’s FDI data are presented in net terms such as equity capital placements less withdrawals, while the PSA’s foreign investment data do not account for equity withdrawals.
The BSP earlier reduced the net FDI forecast this year to $9 billion from $11 billion. It also adjusted the FDI forecast for 2024 to $11 billion from $12 billion in line with the slowdown in non-residents investments globally.
Net FDI inflows contracted 23.2 percent to $9.2 billion in 2022 from a record $12 billion in 2021, pulled down by the sluggish global growth and persistently high inflation.
The 2022 net inflows, however, surpassed the target for the year of $8.5 billion.