The Bangko Sentral ng Pilipinas (BSP) on Monday reported that the foreign direct investment (FDI) in April recorded the biggest net inflow in 12 months at $874 million, however, it dropped from the level a year ago when net inflows hit an all-time high.
The net inflow in April rose by 71.7 percent from $509 million in March, but fell 61.1 percent from the record-high $2.24 billion posted a year earlier, central bank data showed.
Investment in debt instruments, or lending by parent companies abroad to their local affiliates to fund existing operations and business expansion, contributed largely to the FDI net inflows during the month.
Inflows from intercompany borrowings reached $723 million in April, but registered a drop of 46.2 percent from $1.34 billion year-on-year.
Reinvested earnings grew by 9.3 percent to $81 million.
Net equity capital infusion of $70 million declined by 91.6 percent from $825 million last year.
In gross terms, equity capital placements of $84 million more than offset $14 million of withdrawals.
The bulk of inflows came from the United States, Japan, Singapore, France and Hong Kong. Placements were channeled primarily into real estate; financial and insurance; electricity, gas, steam and air conditioning supply; manufacturing; and human health and social work activities.
The central bank also reported that net FDI inflow in the first four months of the year reached $2.43 billion “on the back of continued investor confidence in the country’s sound macroeconomic fundamentals.”
However, the net FDI inflows in January to April registered a 32 percent decline from $3.58 billion year-on-year.
Net placements in debt instruments expanded by 2 percent to $1.98 billion from $1.95 billion.
Reinvested earnings reached $274 million, up 7.5 percent.
Offsetting the cumulative inflows were equity capital investments of $170 million, down 87.6 percent from $1.37 billion. Equity capital placements reached $275 million while withdrawals amounted to $105 million.
Placements during the period came mostly from Japan, the United States, Singapore, Hong Kong and Germany.
Land Bank of the Philippines market economist Guian Angelo Dumalagan said the year-on-year drop in FDI could be traced to “increased caution in the global market as a result of rising US interest rates and geopolitical concerns in foreign countries.”
In particular, he noted that the shift from equity placements to debt instruments might be a reflection of rising market uncertainties.
“Debt is relatively safer than equity. With more uncertainty domestically and abroad, foreign investors might be opting for the safer alternative, which is debt,” he said.
Dumalagan said the April data indicated that investors continued to nurture confidence in the Philippine economy despite geopolitical tensions in the country such as the crisis in Marawi City.
In the coming months, he said, the country might continue to record net FDI inflows as the recent domestic developments might not significantly affect the trend in foreign direct investment.
“As such, they do not alter the country’s long-term potential,” he said.