BSP says FDIs continued growth in July when COVID-19 lockdowns started easing

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More long-term capital from overseas entered the Philippines in July marking the third consecutive month of increases for this key economic barometer.

The total foreign direct investment (FDI) tally for 2020, however, remained below levels recorded in the same period in 2019, according to central bank data.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said FDI net inflows continued its upward gallop in July, registering an increase of 35.2 percent year-on-year to $797 million from $590 million in the same period in 2019.

“The FDI net inflows rose for the third consecutive month on the back of investors’ improving sentiment due in part to easing of containment measures, and some signs of gradual improvements in economic activity based on high-frequency indicators,” the central bank said.

The growth in FDI net inflows in July 2020 was mainly on account of net investments in debt instruments, which rose by 60.1 percent to $643 million from $402 million in July 2019.

Net equity capital investments declined by 19.6 percent to $81 million in July 2020 from $101 million in 2019. This was due primarily to lower equity placements of $89 million vis-à-vis $170 million in July 2019, but mitigated by a decline in withdrawals to $8 million from $69 million in July 2019.

Equity capital placements in July came mostly from Japan, China and the United States. These were channeled largely to the construction, real estate, wholesale and retail trade, and manufacturing industries.

Likewise, reinvestment of earnings decreased by 16.1 percent to $73 million in July 2020 from $87 million last year.

The increase in FDI net inflows in July 2020 further mitigated the year-to-date decline for the first seven months of 2020 to 10.9 percent to $3.8 billion from $4.3 billion from the 18.3 percent cumulative contraction in January to June 2020.

Driving this development was the increase in net equity capital investments, which posted a cumulative growth of 111.1 percent to $991 million from $469 million. In particular, equity capital placements grew moderately by 6.2 percent to $1.12 billion from $1.05 billion, while withdrawals declined by 78.5 percent to $125 million from $582 million.

Equity capital placements during the period originated mainly from Japan, the Netherlands, Singapore and the United States. These were invested primarily in manufacturing, real estate, financial and insurance, and administrative and support service industries.

Net investments in debt instruments and reinvestment of earnings recorded lower reductions of 27.1 percent from 39.8 percent by June to $2.3 billion and 20.9 percent from 21.7 percent by June to $506 million.