Net FDI inflow slumps 25% to $429 million in May
The net inflow of foreign direct investments (FDIs) fell for the first time this year, contracting by 25.4 percent to a year-low of $429 million in May from $575 million in the same month last year because of concerns about rising COVID-19 cases worldwide due to new and more contagious variants.
Data from the Bangko Sentral ng Pilipinas (BSP) showed the net FDI inflow last month was the lowest since the $317 million recorded in April last year.
“The FDI decline in May 2021 reflected renewed investor concerns on the rising cases of the new variants of COVID-19 globally,” the BSP said.
However, despite the sharp decline in March, the BSP said the country recorded a 38 percent jump in net FDI inflow to $3.48 billion from January to May compared to $2.53 billion in the same period last year.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said the year-on-year decline in net FDI inflow in May reflected the adverse effects of the tighter quarantine restrictions as the National Capital Region and nearby provinces (NCR Plus) were placed under enhanced community quarantine and modified ECQ from March until mid-May due to the resurgence of COVID-19 infections.
“Lingering global concerns over the more contagious coronavirus variants such as the Delta and Lambda could have also weighed on global FDIs,” Ricafort said.
Equity capital placements coming primarily from Japan, the US and Malaysia channeled to manufacturing, real estate, as well as financial and insurance industries, fell by nearly 43 percent to $82 million in May from $142 million in the same month last year.
On the other hand, equity pulled out from the Philippines jumped by 70 percent to $21 million in May from $13 million a year earlier.
Likewise, non-residents’ net investment in debt instruments consisting mainly of loans extended by parent companies abroad to their local affiliates declined by 23.4 percent to $269 million from $351 million.
The BSP said reinvestment of earnings inched up by six percent to $99 million in May from $94 million in the same month last year.
Ricafort said optimism over the passage of Republic Act 11534 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act could have somewhat faded and have been overshadowed by the rising COVID-19 infections despite the government’s vaccine rollout.
For the five-month period, net investment in debt instruments jumped by 76 percent to $2.2 billion compared to $1.25 billion in the same period last year, while reinvestment of earnings inched up by three percent to $407 million from $395 million.
On the other hand, equity infusions coming from Singapore, Japan, and the US and invested in financial and insurance; electricity, gas, steam, and airconditioning; manufacturing; and real estate decreased by 5.4 percent to $1.02 billion from $1.07 billion.
Withdrawals fell by 26.7 percent to $139 million from $190 million.
Due to the pandemic-induced global recession, the net inflow of FDIs to the Philippines slumped by nearly 25 percent to hit a five-year low of $6.54 billion from $8.67 billion in 2019. This was the lowest since the $5.64 billion recorded in 2015.
As the Philippines is seen recovering from the pandemic-induced recession, the BSP sees net FDI inflow bouncing back to hit $7.5 billion this year and $8.5 billion next year.