Net inflows of foreign direct investments (FDI) in the Philippines fell 29.6 percent to $655 million in October from $930 million in the same month in 2022, the Bangko Sentral ng Pilipinas (BSP) said Wednesday.
The BSP linked the decline to the 26.1-percent decrease in net investments in debt instruments to $504 million from $682 million.
Data showed that non-residents’ net investments in equity capital (other than reinvestment of earnings) and reinvestment of earnings also went down by 54.4 percent and 10.3 percent to $74 million from $163 million and $76 million from $85 million, respectively.
“The bulk of the equity capital placements during the reference month originated from Japan, the United States and Singapore,” the BSP said.
These were directed mostly to the manufacturing with 54 percent; followed by real estate, 18 percent; and financial and insurance industries, 15 percent.
Data also showed that net FDI inflows from January to October amounted to $6.5 billion, down by 17.5 percent from $7.9 billion in the same period in 2022.
The top sources of FDIs in the 10-month period were Japan, the United States, Singapore and Germany.
“While FDI continued to record net inflows, the recent decline in levels reflect the adverse impact of persistent inflationary pressures and slowing global growth prospects on investor decisions,” the BSP said.
Michael Ricafort, chief economist of Rizal Commercial Banking Corp., said investment commitments generated from overseas trips of the administration would help improve the FDI data going forward.
Ricafort said, however, that an offsetting risk factor for FDI is any potential increase in new COVID cases locally and worldwide amid lingering concerns over more contagious coronavirus variants that could slow down economic recovery prospects.
“Another offsetting risk factor that could be a drag on FDIs is the Russia-Ukraine war that could further disrupt the global supply chains, in terms of some reduction in global trade [both exports and imports], potential drag on some investment activities as well,” Ricafort said.
“Higher interest rates amid continued rate hikes/monetary tightening by the US and other central banks to bring down elevated inflation could lead to risks of US recession and, in turn, could also slow down global economic growth/recovery and could also be a drag on investments/FDIs in the coming months,” he said.