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FOREIGN INVESTMENTS in the Philippines increased 42% in May, reversing three months of decline due to the impact of the coronavirus pandemic on investors.bedencia, the central bank said Wednesday.
Data from Bangko Sentral ng Pilipinas (BSP) showed that net inflows of foreign direct investment (FDI) increased to $ 399 million in May from $ 280 million a year ago. Tickets in May also improved by 28% from $ 311 million in April.
Despite the May rebound, FDI inflows so far this year fell by a quarter to $ 2.379 billion from $ 3.196 billion a year ago.
“The stronger performance of FDI during the month (May) relative to last year’s level was due to the increase in net investments by non-residents in equity and debt instruments,” BSP said in a statement. .
In May, net investments in debt instruments increased 40.8% year-over-year to $ 236 million, while reinvested earnings fell 23.7% to $ 85 million.
Equity other than reinvested earnings soared to $ 738 million from $ 1 million last year. This as placements rose 8.1% to $ 80 million while withdrawals plummeted 96% to $ 3 million.
During the month, placements came mainly from Japan, Singapore and the United States, where the restriction measures were gradually relaxed. The BSP said that most of the investments went to the manufacturing, finance and insurance and real estate industries.
Inflows to stocks and mutual fund shares also increased 44.8% to $ 162 million year-over-year.
The BSP said that net FDI inFloridaFlows could reach $ 4.1 billion this year, more than half of its projection of $ 8.8 billion given last year.
In 2019, net FDI inFloridaFlows fell 23.1% to $ 7.647 billion as investor confidence declined due to global uncertainty, regulatory risks and delays in the Philippine tax reform program.
May’s rebound amid the lockdown could be due to lagged effects of FDI inflows into the country, said John Paolo R. Rivera, an economist at the Asian Institute of Management.
“This growth may be due to already sealed deals and transactions, perhaps in 2019, that came into effect only during this period,” Rivera said in a text message.
“Alternatively, the Philippines has alternative locations for FDI to go,” he said.
“Not all FDI settled in COVID-19 barely hit areas like NCR (National Capital Region). The diversity of possibilities for an archipelagic economy like the Philippines could have been a factor for the sustained growth of FDI ”, he added.
UnionBank of the Philippines, Inc. chief economist Rubén Carlo O. Asunción said higher FDI inflows in May could boost confidence in the country as it grapples with the coronavirus crisis.
“Even if it came from a fairly low base, the green signal is a welcome signal for an economy that needs positive news, especially from national economic data,” Asunción said in an email.
Analysts said urgent policies will set or break the FDI recovery path in the coming months, as the COVID-19 pandemic weighs on investor sentiment.
Political reforms that will be critical for FDI inflows include the approval of the Corporate Recovery and Tax Incentives for Companies (CREATE) bill and amendments to the Public Service Law (PSA), Asunción said.
The first bill, which will reduce income tax from 30% to 25%, is pending in the Senate. A Senate committee is also addressing amendments to the PSA, which will remove restrictions on foreign ownership in certain sectors.
The Philippines’ ability to control the coronavirus pandemic will determine whether it can attract more FDI, Rivera said.
Also note that other ASEAN countries are very successful in containing the pandemic; all are potential destinations for FDI ”, he added.
On Wednesday, the Health department reported 2,218 new coronavirus infections, bringing the total to 226,440. The death toll has reached 3,623. – Luz Wendy T. Noble
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