Net inflows of foreign direct investments (FDI) in the Philippines surpassed the $6-billion mark in the first eight months of 2024 despite a slight drop in August, data from the Bangko Sentral ng Pilipinas show.
The BSP said FDI net inflows amounted to $813 million in August 2024, down from $951 million in the same period last year.
It said the decline was due to the 21.6-percent contraction in nonresidents’ net investments in debt instruments to $529 million from $675 million. Nonresidents’ reinvestment of earnings also went down by 9.4 percent to $217 million from $240 million.
Meanwhile, nonresidents’ net investments in equity capital (other than reinvestment of earnings) expanded by 83.6 percent to $66 million from $36 million in August 2023.
These equity capital placements came mostly from Japan and the United States and mostly invested in the manufacturing, real estate, and electricity, gas, steam and air-conditioning supply industries.
The BSP said that on a cumulative basis, net FDI inflows in the first eight months rose 3.9 percent to $6.1 billion from $5.8 billion a year ago.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the still relatively higher inflation and interest rates increased borrowing/financing costs for global and local investors.
“The year-on-year improvement in the FDI data in earlier months, still among pre-pandemic highs, may have to do with improved economic and financial markets performance in recent months, such as the headline inflation trending recently well within the central bank targets that could support/justify Fed rate cuts and local policy rate cuts later in 2024,” Ricafort said.
“For the coming months, possible further cuts in the U.S./global/local policy rates expected from 2024-2026, especially if inflation remains well anchored within inflation target of the central bank, could also lead to further pick up/improvement in FDIs eventually,” he said.
Ricafort said the Philippine economic growth, which is still among the fastest in ASEAN/Asia, would help boost investments and serve as a bright spot for the local economy. This would also help boost jobs/employment, business activities and other economic opportunities for the country, he said.
