FDI Net Inflows Grow by 142.9 Percent in May 2018; First Five Months’ Level Reaches US$4.8 Billion

Foreign direct investments (FDI) net inflows rose more than twice in May 2018 to US$1.6 billion from US$677 million recorded last year.1,2 This reflects continued investor confidence in the Philippine economy’s strong macroeconomic fundamentals and growth prospects. All FDI components yielded higher net inflows during the month. About eighty percent of FDI net inflows were in the form of non-residents’ investments in debt instruments issued by local affiliates (intercompany borrowings), which grew by 135.7 percent to US$1.3 billion from US$564 million in 2017. Net equity capital investments increased more than five times to reach US$241 million from US$43 million during the same month last year. Equity capital placements amounted to US$257 million while withdrawals continued to be low at US$15 million. Equity capital placements were sourced primarily from Singapore, the United Kingdom, Germany, the United States and Japan. These were channeled largely to manufacturing; real estate; electricity, gas, steam and air conditioning supply; financial and insurance; and professional, scientific and technical activities. Reinvestment of earnings amounted to US$75 million, slightly higher by 5.7 percent than the US$71 million recorded in May 2017.

On a year-to-date basis, FDI net inflows for the first five months of 2018 grew by 49 percent to US$4.8 billion from US$3.3 billion last year. This is mainly on account of the expansion in net equity capital investments by 469.1 percent to US$1.4 billion. Gross equity capital placements grew more than four times to US$1.5 billion, while withdrawals amounted to US$139 million. Equity capital placements during the period emanated mainly from Singapore, Hong Kong, China, Japan, and the United States. The said placements were largely invested in manufacturing; financial and insurance; real estate; arts, entertainment and recreation; and electricity, gas, steam and air-conditioning supply activities. Debt instruments increased by 17.3 percent to US$3.1 billion from US$2.7 billion in the same period last year. Meanwhile, reinvestment of earnings amounted to US$343 million during the period.

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1 Based on the Balance of Payments and International Investment Position Manual, 6th edition (BPM6) which uses the asset and liability principle in the compilation of FDI statistics. Under the asset and liability principle, claims of non-resident direct investment enterprises from resident direct investors are presented as reverse investment under net incurrence of liabilities/non-residents’ investments in the Philippines (previously presented in the Balance of Payments Manual, 5th edition (BPM5) as negative entry under assets/residents’ investments abroad). Conversely, claims of resident direct investment enterprises from foreign direct investors are presented as reverse investment under net acquisition of financial assets/residents’ investments abroad (previously presented as negative entry under liabilities/non-residents’ investments in the Philippines).

2 BSP statistics on FDI covers actual investment inflows, which could be in the form of equity capital, reinvestment of earnings, and borrowings between affiliates. In contrast to investment data from other government sources, the BSP’s FDI data include investments where ownership by the foreign enterprise is at least 10 percent. Meanwhile, FDI data of Investment Promotion Agencies (IPAs) do not make use of the 10 percent threshold and include borrowings from foreign sources that are non-affiliates of the domestic company. Furthermore, the BSP’s FDI data are presented in net terms (i.e., equity capital placements less withdrawals), while the IPAs’ FDI do not account for equity withdrawals.

Source: Bangko Sentral ng Pilipinas (BSP)

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