Foreign direct investments (FDI) lost steam in November but were still enough to push the year-to-date tally past the 2017 target, the Bangko Sentral ng Pilipinas (BSP) reported on Monday.
The month’s $869-million net inflow — smaller than October’s $2.017 billion — was still 16.9 percent higher on an annual basis.
The 11-month tally subsequently rose to $8.725 billion, up 20.1 percent year on year and exceeding the BSP’s 2017 goal of a record P8 billion.
“The sustained FDI inflows reflected investor confidence given the Philippine economy’s solid macroeconomic fundamentals and growth prospects,” the central bank said in statement.
December’s inflows were traced to a 13.1-percent expansion, to $604 million, in non-residents’ net placements in debt instruments issued by local affiliates or intercompany borrowings.
Net equity capital inflows also grew by 38.7 percent to $210 million as equity capital placements of $228 million more than offset the $18 million in withdrawals.
“The bulk of gross equity capital investments came from Singapore, Hong Kong, Luxembourg, China, and the United States,” the central bank said.
Reinvestment of earnings amounted to $56 million during the month.
Meanwhile, the BSP said net FDI inflows in the first 11 months of the year were driven largely by a 9 percent growth in net placements in debt instruments to $5.2 billion.
Net investments in equity capital reached $2.8 billion from $1.8 billion in the comparable 2016 period on account of the combined effect of higher equity capital placements ($3.3 billion from U$2.4 billion) and lower withdrawals ($483 million from $555 million).
Equity capital infusions during the period came mainly from the Netherlands, the United States, Singapore, Japan and Hong Kong, and were invested largely in gas, steam and air-conditioning supply; manufacturing; real estate; construction; and wholesale and retail trade activities.
Reinvestments of earnings reached $717 million.
Sought for comment, Land Bank of the Philippines economist Guian Angelo Dumalagan said net FDI trended inversely with the peso’s strength against the dollar.
“This makes sense because investing dollars in the country when the peso is at its weakest would mean a higher peso amount for every dollar invested,” said, noting that in October last year, when the peso reached its lowest average monthly value for 2017, net FDI inflow peaked at P2.017 billion.
Moving forward, Dumalagan said that the peso’s recovery in December 2017 could lead to a corresponding monthly decline in net FDI inflows.
While monthly movements in net FDI might be influenced more by exchange rate movements, he said that annual changes are likely affected more by the country’s fundamentals and investor perceptions of the country’s future prospects.
“Along this line, there has been a significant increase in the country’s net FDI for November 2017 and for the whole of last year as a result of improved investor optimism amid the Duterte administration’s key initiatives — [the]‘Build Build Build’ program and Train (Tax Reform for Acceleration and Inclusion) law — which are expected to support the country’s growth in the next few years,” Dumalagan said.