Net inflows of foreign direct investments declined to a 14-month low on increased global and local market volatilities, elevated inflation and rising interest rates, data from the Bangko Sentral ng Pilipinas show.
FDIs posted $460 million in net inflows in July, bringing the cumulative net inflows to $5.1 billion in the first seven months.
These levels were lower than the comparable net inflows of $1.3 billion in July 2021 and $5.8 billion in the seven-month period last year.
“All major FDI components yielded lower net inflows in January to July 2022 as foreign investors remained cautious amid continued adverse global conditions,” the BSP said.
“In July 2022, FDI net inflows decreased due largely to the lower non-residents’ net investments in debt instruments of their local affiliates. This decrease more than offset the growth in their net investments in equity capital,” it said.
Equity capital infusions came mainly from Singapore, Japan and the United States. These were invested largely in the construction, manufacturing and real estate industries.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said the lower FDIs were “partly weighed by higher inflation and interest rates/borrowing costs/financing costs that are drags to new investments/FDIs globally and locally; as well as some wait-and-see attitude by foreign/global investors as the new administration assumed,” he said.
Net FDI inflows reached a record $10.5 billion in 2021, breaching the previous high of $10.3 billion in 2017.
The 2021 level represented a 54.2-percent increase from $6.8 billion in 2020. It also surpassed the $8-billion net inflow target set by the BSP.
FDIs 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.
The BSP FDI statistics are distinct from the investment data of other government sources.