Philippines foreign direct investments down 6.6% in 2023

Despite a strong 29.9 percent increase in foreign direct investment (FDI) in December 2023, the country’s full-year 2023 FDI net inflows reached only $8.9 billion, a 6.6 percent decline, from the $9.5 billion net inflows recorded in 2022, data from the Bangko Sentral ng Pilipinas (BSP) showed.

In a report Monday, March 11, the BSP said that FDI net inflows in December last year went up 29.9 percent to $826 million from the $636 million net inflows in December 2022.

The BSP said FDI increased mainly on the back of the 86.2 percent growth in non-residents’ net investments in debt instruments to $527 million from $283 million in the comparable month in 2022.

Similarly, reinvestment of earnings improved slightly by 4.1 percent to $91 million from $87 million.

Meanwhile, non-residents’ net investments in equity capital (other than reinvestment of earnings) declined by 21.7 percent to $208 million in December 2023 from $266 million a year ago.

The bulk of the equity capital placements in December 2023 came from Japan (amounting to 81 percent) with investments directed mostly to the manufacturing industry. This was followed by Singapore and the United States at about five percent each.

For the entire 2023, the BSP data showed that FDI net inflows reached $8.9 billion, or a contraction of 6.6 percent, from the $9.5 billion net inflows recorded in 2022.

Notwithstanding the country’s sound macroeconomic fundamentals, BSP said that concerns over subdued global economic growth and geopolitical risks continued to weigh on investors’ investment plans.

Japan accounted for a majority of equity capital placements for the entire 2023 at 51 percent followed by the United States (13 percent), Singapore (12 percent), and Germany (8 percent). The Manufacturing sector continued to benefit the most from these investments.

The BSP statistics on FDI are compiled based on the Balance of Payments and International Investment Position Manual, 6th Edition (BPM6).

It includes investment by a non-resident direct investor in a resident enterprise, whose equity capital in the latter is at least 10 percent, and investment made by a non-resident subsidiary or associate in its resident direct investor. FDI can be in the form of equity capital, reinvestment of earnings, and borrowings.

The BSP FDI statistics are distinct from the investment data of other government sources. BSP FDI covers actual investment inflows.
In contrast, the approved foreign investments data that are published by the Philippine Statistics Authority (PSA), which are sourced from Investment Promotion Agencies (IPAs), represent investment commitments, which may not necessarily be realized fully, in a given period.

Further, the said PSA data are not based on the 10 percent ownership criterion under BPM6. Moreover, the BSP’s FDI data are presented in net terms (i.e., equity capital placements less withdrawals), while the PSA’s foreign investment data do not account for equity withdrawals. — James A. Loyola