June 13, 2019
GROWTH in net foreign direct investments (FDI) could “pick up in the coming months” despite dropping to a four-month low in March, according to an analyst.
In a statement late on Tuesday, RCBC Economics and Industry Research Division Corporate Planning Group Head Michael Ricafort said that, at “the rate FDI are doing as of [the first quarter of] 2019 and in view of any possible pickup in the coming months, total FDI for the year would still be similar to around the record levels seen in the past one to two years.”
Net FDI reached $9.802 billion last year and $10.256 billion in 2017.
The Bangko Sentral ng Pilipinas (BSP) reported on Monday that net FDI reached $586 million in March, down 13.9 percent from $681 million in the same month last year and bringing the tally for the first quarter to $1.941 billion.
According to Ricafort, factors that would drive FDI growth are the credit upgrade the country received in late April and lower interest rates.
“S&P (Standard and Poor’s) [Global Ratings] upgraded the Philippines’ credit rating by one notch to “BBB+,” he said, explaining that this reflected “improved international investor sentiment on the Philippines, and may increase the inflows of foreign direct investments into the country.”
The global debt watcher explained then it raised the country’s rating, to which it assigned a stable outlook, to reflect “the Philippines’ strong economic growth trajectory, which we expect to continue to drive constructive development outcomes and underpin broader credit metrics over the medium term.”
Ricafort also said reduced interest rates would encourage more borrowings or loans needed to finance more FDI both new investment and expansion projects by foreign investors.
The central bank’s policymaking Monetary Board on May 9 slashed these rates by 25 basis points (bps) — as well as overnight borrowing, lending and deposit rates to 4.5 percent, 5 percent and 4 percent, respectively — on expectations that inflation would remain manageable.
Aside from these, the analyst said a possible trade deal between the United States and China could “lead to some pickup in Philippine trade, both exports and imports, and could encourage more FDI into the country.”
“If the US-China trade war lingers or worsens, some FDI may be redirected from China to [Southeast Asian] countries such as the Philippines to avoid higher tariffs on US imports from China,” he added.
Other factors that could boost FDI growth, Ricaford said, include greater clarity on the proposed rationalization of fiscal incentives, easing inflation that would increase the profits of some foreign investors, and increased government spending on major infrastructure projects that would will improve the movement of goods in the country.
He added, however, that a major risk is the global economic slowdown due to the trade row between Washington and Beijing.
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