FDI net inflows hit 10-month low in March

NET inflows of foreign direct investments (FDIs) hit a 10-month low in March, data released by the Bangko Sentral ng Pilipinas (BSP) on Monday showed.

The net inflows during the month amounted to $727 million, down by 9.8 percent than the $806 million recorded in March last year and the lowest since the $452 million in May 2021.

It was also lower than the $893 million seen in February.

“While the country’s macroeconomic fundamentals remain sound, external risks, such as the impact of Russia’s invasion of Ukraine on commodities and financial market condition, the start of policy tightening in several major central banks and the resurgence of Covid-19 cases in many Asian economies, may have contributed to investors’ concern about the outlook on the global economic recovery,” said the central bank in a statement.

Nonresidents’ net investments in debt instruments of local affiliates grew by 45.1 percent to $543 million from $374 million in March 2021.

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Nonresidents’ net investments in equity capital, however, fell by 69.6 percent to $106 million from $349 million.

“This resulted as equity capital placements contracted by 68.7 percent to $118 million from $378 million, but was somewhat mitigated by the 58.2 percent decline in equity capital withdrawals to $12 million from $28 million,” said the BSP.

Reinvestment of earnings declined by 5.4 percent to $78 million from $82 million.

The Bangko Sentral said majority of the equity capital placements were primarily from Japan, the United States, and Singapore and were channeled to manufacturing, real estate, and financial and insurance industries.

For the first quarter of the year, FDI net inflows went up by 2 percent to $2.4 billion.

Nonresidents’ net cumulative investments in debt instruments for the first quarter of grew by 33.5 percent to $1.9 billion from $1.4 billion in 2021 while net investments in equity capital and their reinvestment of earnings declined by 57.6 percent at $311 million and 2.7 percent at $229 million, respectively.

The Bangko Sentral said equity capital placements dropped by 58.1 percent to $352 million which was slightly offset by the 61.1 percent decline in withdrawals to $42 million.

Bulk of the equity capital placements during the period came from Japan, the United States, Kuwait, and Singapore and were channeled to manufacturing, real estate, and financial and insurance industries.

In a comment, Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort said the lower net inflows in March could be due to Russia’s invasion of Ukraine which led to higher commodity prices and increased risk aversion that could slow down global economic recovery prospects.

He said however that the FDIs during the month is still among pre-pandemic highs and continues to be one of the major pillars of the economic recovery program.

“Additional measures to further re-open the economy such as the recent easing of the lowest Alert Level to 1 for Metro Manila and more areas since March 2022, proposed nationwide Alert Level 1, among other measures to further re-open the economy, in an effort to offset the adverse economic effects of the Russia-Ukraine conflict, alongside the resumption of foreign tourism starting February 10, 2022, would allow more businesses to increase capacity, thereby improving economic recovery prospects that would further help attract more FDIs into the country,” said Ricafort.

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