FDI spikes 40% to surpass central bank 2016 target

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NET foreign direct investment (FDI) closed 2016 with double-digit growth from a year earlier and surpassed the central bank target for the year on the back of sustained inflows in equity capital and inter-company borrowings.

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Bangko Sentral ng Pilipinas (BSP) data showed that net FDI inflows spiked by 40.7 percent to $7.93 billion in 2016 from $5.63 billion a year earlier.

Last year’s net FDI also surpassed the $6.7-billion forecast by the BSP in 2016.

In December alone, net inflows amounted to $669 million, more than double the $272 million recorded in the comparable period in 2015.

“FDI inflows remained robust, supported by strong investors’ confidence in the country’s solid macroeconomic fundamentals,” the BSP said on Friday.

It said net availment of debt instruments rose by 68.6 percent to $5.18 billion from $3.07 billion in 2015.
Equity capital investments posted net inflows of $2.3 billion, up 12.1 percent from $1.18 billion in the same comparable period.

“This resulted as placements of $2.7 billion outweighed withdrawals of $643 million,” the BSP said.

Equity capital placements originated mainly from Japan, Hong Kong, Singapore, the United States, and Taiwan, and was infused largely to financial and insurance; arts, entertainment and recreation; manufacturing; real estate; and construction activities.

Meanwhile, reinvestment of earnings declined by 4.9 percent to $710 million during the year.

Sustained inflows seen

Land Bank of the Philippines market economist Guian Angelo Dumalagan said the Philippines might continue to register net FDI inflows this year as a result of strong macroeconomic fundamentals and improving economic conditions abroad.

“Japan and the US, two of the country’s major sources of FDIs, are expected to show stronger growth this year,” he said.

This development suggests potentially ample investable funds from these economic giants despite possibly lesser monetary accommodation from the Bank of Japan and the US Federal Reserve, Dumalagan noted.
However, the protectionist stance of the new US administration poses a risk to FDI, as it could potentially reduce the amount of capital inflows from the US, he added.

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