Foreign direct investments (FDI), useful both as a measure of and as vehicle for economic advancement, flowed inward on net basis in the first 10 months last year but stood 17.5 percent lower to only USD6.5 billion, the Bangko Sentral ng Pilipinas (BSP) said on Wednesday.
This compares against FDIs aggregating USD7.9 billion in the same period in 2022.
While the numbers continue to reflect inflows, the decline reflects the adverse impact of persistent inflationary pressures and slowing global growth prospects on investor decisions, the BSP said.
Inflation acts as a tax on the flow of services and goods across countries that in the case of the Philippines was as high as 8.7 percent at one point last year. Its severity was such that inflation proved well above the 2 to 4 percent official target for the year, averaging 6 percent instead.
In October alone, the FDIs rounded the month as a net inflow totaling USD655 million or 29.6 percent lower than a year earlier when this totaled USD930 million.
“This was due largely to the 26.1 percent decrease in net investments in debt instruments to USD504 million from USD682 million,” the BSP said, explaining that FDI participation comes in the form of equity capital, reinvestment of earnings or as debt.
“Nonresidents’ net investments in equity capital (other than reinvestment of earnings) and reinvestment of earnings also declined by 54.4 percent and 10.3 percent to USD74 million (from USD163 million) and USD76 million (from USD85 million), respectively,” it said.
Foreign investor purchases of domestically issued debt securities also fell 26.1 percent to USD504 million from USD682 million, the BSP said.
The bulk of equity capital during the month came from Japan, the United States and Singapore and invested in manufacturing, real estate and the financial and insurance sectors.
The authorities would rather that FDIs keep coming as these are invested directly in industries that generate employment for Filipinos and tax revenue for the nation’s coffers and preferred over portfolio investments, more known as “hot” or speculative investments which are quickly withdrawn and remitted overseas at the merest sign of domestic trouble or indication of greater rewards elsewhere.
