FDI inflows plummet in July on growing recession fears

Ramon Royandoyan – Philstar.com

October 10, 2022 | 12:06

MANILA, Philippines — Foreign direct investment in the Philippines slowed in July amid looming global recession fears that could cloud investor sentiment in the months ahead.

Bangko Sentral ng Pilipinas data released on Monday showed FDI generated a net inflow of $460 million in July, down 64.4% year-on-year. A net inflow means that more FDI entered the country than left.

Since the beginning of the year, FDI has recorded net inflows of 5.1 billion dollars, down 12% on an annual basis.

FDI is different from so-called “hot money” which easily moves in and out of markets with relative ease. These investments are firmer commitments that create jobs for Filipinos, so the government wants to attract more FDI and not just retain those that already exist.

For this year, the central bank projects net inflows of $10.5 billion for the year as a whole, less than the actual net inflows of $12.4 billion recorded last year.

Domini Velasquez, chief economist at China Banking Corp., said the latest FDI data could reflect an expected global recession as economic growth is expected to slow next year.

“Stricter financial conditions in the main source countries could have contributed to the decline in FDI. A rising interest rate environment, a more pessimistic business environment and higher costs may prevent foreign companies from investing in the short term,” she said in a Viber message.

The disaggregated data showed that in the first seven months of 2022, equity investments, a measure of new FDI, fell 21.6% year-on-year to $977 million.

Part of July’s inflows were supported by intercompany borrowing between multinational companies and their local offices, which nevertheless fell 80.6% year-on-year to $213 million.

Earnings reinvestment fell 31.4% year-on-year to $111 million in the month.

“However, as evidenced by industries seeing positive inflows, such as construction, real estate and manufacturing, the medium-term outlook in the Philippines remains optimistic,” Velasquez added.


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