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Net inflows of foreign direct investment (FDI) to the Philippines increased for the second month in a row in June as lockdown restrictions eased in the Philippine capital, but it was not enough to reverse the decline during the beFirst half.
IED is notFloridaFlows reached $ 481 million in June, 7.1% more than the $ 449 million a year ago, data from the Bangko Sentral ng Pilipinas (BSP) showed.
June inflows were 19.67% more than the $ 402 million recorded in May, and the highest since the $ 563 million recorded in March.
“This positive development was supported by the gradual reopening of advanced economies with investment interest in the Philippines, and the country’s strong sustained macroeconomic fundamentals, despite the COVID-19 pandemic,” the BSP said in a statement Wednesday.
In June, the government eased closure restrictions in Metro Manila and nearby provinces for the first time since mid-March. More businesses were allowed to reopen, while public transportation was partially resumed.
The normalization of supply chains allowed more FDI to enter the country, said Rizal Commercial Banking Corp. chief economist Michael L. Ricafort.
June earnings were not enough to boost the beFDI inflows in the first half, which decreased 18.3% to $ 2,997 billion.
“Despite relatively lower interest rates resulting in low cost of borrowing, investor sentiment remains at an all-time low, a spinoff of the recession, ”Emmanuel J. López, dean of the Graduate School of the Colegio de San Juan de Letrán, said in an email.
The country entered a recession after the gross domestic product fell by a record 16.5% in the second quarter due to the pandemic and the subsequent lockdown.
In June, net investments in debt instruments fell 28.8% to $ 229 million from $ 321 million a year ago. Reinvested earnings also fell 19.4% to $ 80 million in June from $ 99 million.
“These [decreases] can still beFloridaeffect the sharp year-on-year decline in global business sales and revenue largely due to lockdowns resulting in reduced capital expenditures, cost-cutting measures in response to slower business / economic conditions ”, Ricafort said.
Meanwhile, shares other than earnings reinvestment increased six-fold to $ 173 million in June from $ 29 million a year ago. This is because placements more than doubled to $ 185 million from $ 78 million, while withdrawals plummeted 74.9% to $ 12 million from $ 49 million.
“Most of the share capital placements for the month originated in Japan, the United Kingdom and the United States,” said the BSP.
Investments flowed mainly into industries such as manufacturing; human health and social work; befinance and insurance; and real estate.
Foreign investments in stocks and shares in funds also nearly doubled to $ 253 million.
The BSP projects net FDI inflows to reach $ 4.1 billion in 2020, much lower than the outlook of $ 8.8 billion it gave last year before the crisis.
Ricafort said that the approval of the Corporate Recovery and Tax Incentives for Companies (CREATE) bill will be key to attracting more foreign investment in the coming months. In CREAR, the corporate income tax will be immediately reduced to 25% from the current 30%.
Previously, Michael Langham, Senior Asia Country Risk Analyst at Fitch Solutions, said Business world the government should speed up the approval of key reforms this year to help attract more investment.
Other reform measures include amendments to the Retail Trade Liberalization Act (RTLA) and the Public Service Act (PSA) that are still pending in the Senate.
The amendments to the RTLA will reduce the required minimum paid-up capital for foreign companies seeking to establish themselves in the local retail market, while the revisions to the PSA would remove restrictions on foreign ownership in some sectors.
FDI inflows to the Philippines were already down 23.1% to $ 7.647 billion in 2019, amid global uncertainty, regulatory risks, and delays in the tax reform program that affected investor confidence. – Luz Wendy T. Noble
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