Foreign investment falls in Sept, but 9-mth up 25.3%

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Year-to-date tally surpasses full-year 2015 level

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Foreign direct investment (FDI) in the Philippines plummeted in September from a year earlier and from August this year, with the inflow of equity capital down 77 percent year-on-year and investments in debt instruments down 66.3 percent, both leading declines across the board.

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Total Fdi inflows in the nine-month period already exceeded the total Fdi inflows for calendar 2015, which stood at $5.7 billion, an analyst pointed out. The graph shows, however, april recorded an unusually high level of net inflows, largely on the back of debt instruments. That more than made up for the declines in other months and accounted for the sharp year-on-year increase in Fdi for the year-to-date so far.

The year-to-date tally, however, showed a surge from the year-earlier period.

Net FDI plunged 69.3 percent to $469 million in September from $1.53 billion a year earlier, data released by Bangko Sentral ng Pilipinas (BSP) on Monday said. From $71 million in August this year, the level of net FDI in September fell 34 percent.

“In particular, investments in debt instruments recorded lower net inflows of $296 million, representing a year-on-year decline of 66.3 percent,” the BSP said in a statement. Equity capital posted net inflows of $138 million, 77 percent lower than the $600 million registered last year, it said.

Placements were sourced mainly from Japan, Taiwan, Germany, the Netherlands and the United States and mainly channeled into manufacturing, real estate, wholesale and retail trade, financial and insurance, administrative and support service activities, the BSP said.

Reinvested earnings dropped to $35 million during the month, down 31.1 percent from the $51 million recorded in September 2015.

“While FDI inflows into the Philippines slowed down to $469 million in September, which was 69.3 percent lower than the same month a year ago, the monthly profile of FDI inflows is highly volatile, reflecting the lumpy nature of FDI flows by companies,” Rajiv Biswas, Asia-Pacific chief economist at IHS Markit, told The Manila Times.

9-month tally surges

However, Biswas said the overall pattern of FDI inflows for the first nine months of 2016 indicates that FDI has improved during the 2016 year-to-date.

As shown by the official data, net FDI inflows for the first nine months of 2016 reflected a year-on-year jump of 25.3 percent to $5.87 billion.

The total FDI inflows in the nine-month period already exceeded the total FDI inflows for calendar 2015, which stood at $5.7 billion, Biswas pointed out.

“Based on the profile of FDI inflows, total FDI inflows for calendar year 2016 are estimated to reach $7.5 billion, which would be around 30 percent higher than 2015,” he estimated.

The BSP report said intercompany borrowings contributed largely to FDI net inflows during the period, registering an increase of 40.8 percent to $3.7 billion from $2.6 billion last year, the BSP said.

Net equity capital placements expanded 9.3 percent to $1.6 billion, with gross placements of $1.9 billion more than offsetting withdrawals of $248 million.

“The upturn in FDI inflows is positive and reflects the strong economic growth momentum and rapid growth in domestic demand, which has helped to attract foreign investment inflows,” Biswas said.

But he added a word of caution: “The Philippines still underperforms its regional peers in attracting FDI inflows, with Indonesia having obtained $29 billion of FDI inflows in 2015, while Vietnam attracted $23 billion.”

In the nine months to September, the Philippines’ gross equity capital placements came mostly from Japan, Singapore, the United States, Hong Kong, and Taiwan and were largely invested in financial and insurance; manufacturing; real estate; accommodation and food service; and wholesale and retail trade activities, the BSP report said.

Reinvestment of earnings totaled $548 million during the nine-month period.

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