Foreign direct investments (FDI) registered net inflows to the Philippines in July and brought the year-to-date performance up by almost 80 percent, data released by the central bank on Monday showed.
The jobs-generating FDI posted a net inflow of $503 million in July – the first month of President Rodrigo R. Duterte in office. It was up 7.0 percent from $470 million a year earlier, and more than double the $238 million in June.
"The increase in FDI inflows was driven by investors’ positive outlook on the Philippine economy, reinforced by strong macroeconomic fundamentals," the Banko Sentral ng Pilipinas (BSP) said in a statement.
There were hopeful expectations and confidence about the new government at that time, as well the second-quarter economic performance, according to Cid Terosa, dean of the School of Economics Dean at the University of Asia and the Pacific (UA&P).
"It was expected since there was a lot of optimism that followed after the new government was sworn into office. Also, the second quarter GDP (gross domestic product) performance of the country attracted attention and simulated inflow of investments," he said in a text message.
The Philippine economy grew by 7 percent in the second quarter, the fastest pace in more than two years, data from the Philippine Statistics Authority (PSA) showed.
The FDI is a measure of investment made by companies or individuals in a country, and serves as a key source of employment and capital for the domestic economy.
According to the central bank, investments in debt instruments grew by 79.4 percent to $417 million in July from $232 million a year earlier. On the other hand, equity capital registered net inflows of $23 million, down 85.5 percent in the same comparable period. The BSP did not disclose why the net equity capital inflows declined.
Concerns
Most of the equity capital placements came mainly from Japan, Korea, Germany, Singapore, and the United States. These were invested largely in real estate, wholesale and retail trade, manufacturing, financial and insurance, and construction activities.
Year-to-date, the net inflows of FDI at $4.695 billion were up 79.1 percent from $2.621 billion in January to July 2015. This year’s inflows included a record $2.244 billion in April.
Terosa, however, noted the growing FDI may not be sustained in the face of domestic and international concerns.
"I believe growth will be tempered by global economic developments, particularly the possible rise in interest rates in the US," he said.
The Federal Open Market Committee (FOMC) is having policy meetings on November 1 and 2 and then on December 13 and 14 to decided whether or not to raise interest rates.
"Also, concerns about the anti-drug program/campaign of the government can make investors jittery," Terosa noted.
Several foreign business groups such as the European Chamber of Commerce of the Philippines (ECCP), the Nordic Chamber of Commerce of the Philippines (NorCham), and the American Chamber of Commerce of the Philippines (AmCham) have voiced concerns about the campaign against illegal drugs in the country.
"Certainly, the illegal drug menace is a serious threat in the Philippines, as it is in the US and elsewhere. However, the increased number of killings during the heightened anti-drug campaign is harming the country’s image, as portrayed by international media, and some investors are now asking whether this campaign reduced the rule of law," the AmCham said.
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