According to Channel NewsAsia, the Philippines' Foreign Direct Investment (FDI) fell to its lowest level in 16 months in May, as ongoing high inflation posed headaches for investors already concerned about geopolitical tensions.
As per data released by the Bangko Sentral ng Pilipinas (BSP), the net inflow of FDI in May was $499 million, a 1% decline year-over-year.
Despite the decline, the net inflow of FDI over five months still saw a year-over-year increase of 15.8%, reaching $4 billion. BSP expects the total FDI net inflow for the entire year of 2024 to be $9.5 billion.
"The data for May suggests that the economy might be slowing down. Global economic uncertainties, domestic challenges, and regional competition could be reasons for this situation," said Robert Dan Roces, Chief Economist at Security Bank.
"The sensitivity of FDI to interest rates remains high, adding further complexity," Roces continued, adding that achieving BSP's forecast of $9.5 billion in FDI for 2024 "will require sustained investor confidence and a favorable economic environment."
Additionally, John Paolo Rivera, a senior researcher at the Philippine Institute for Development Studies, mentioned that tensions in the South China Sea might have spooked investors.
"However, this could be influenced by the economic growth potential and management of macroeconomic fundamentals," Rivera added.
Analyzing BSP's report, equity capital placements shrank by 32.1% to $174 million in May. Equity capital placements are a measure of new FDI. The majority of new foreign capital during the month came from Japan, with manufacturing accounting for 55% of the new FDI.
However, there was an exit of $14 million worth of FDI in May, although this was a 36.9% decrease from the same period last year. This resulted in net equity capital of $161 million, down by 31.7%.
Reinvestment of earnings also declined by 3.7%, to $97 million. However, intercompany loans between multinational corporations and their Philippine subsidiaries were a bright spot, soaring by 43.4%, to $242 million.
