FDI Records US$1.2 Billion Net Inflows in December 2019; Full-Year Level Settles at US$7.6 Billion

Foreign direct investment (FDI) net inflows amounted to US$1.2 billion in December 2019, 69 percent higher than the US$683 million recorded in December 2018.1,2 This developed mainly on the account of the expansion in net equity capital investments, which reached US$598 million, four times more than the US$136 million posted in the same period in 2018. Net equity capital investments increased as equity capital placements rose to US$626 million (from US$165 million). Equity capital placements came mostly from Singapore, the Netherlands, Japan, and the United States. Said capital infusions were directed mainly to electricity, gas, steam and air-conditioning supply; and financial and insurance activities.

Net investments in debt instruments (consisting mainly of intercompany borrowing/lending between foreign direct investors and their subsidiaries/ affiliates in the Philippines) decreased slightly to US$484 million from US$486 million in the same month in 2018. Meanwhile, reinvestment of earnings grew by 17.2 percent to US$71 million during the period.

For full year 2019, FDI recorded US$7.6 billion net inflows, a 23.1 percent decrease from the US$9.9 billion net inflows in 2018. Notwithstanding the country’s sound macroeconomic fundamentals, global uncertainties dampened investor sentiment during the year. Net investments in debt instruments dropped by 23.2 percent to US$5.2 billion. Similarly, net equity capital investments declined by 38.2 percent to US$1.4 billion. Gross equity capital investments for the year, which originated mainly from Singapore, Japan, and the United States, were channeled mostly to 1) financial and insurance, 2) real estate, 3) electricity, gas, steam and air-conditioning supply, and 4) manufacturing industries. Reinvestment of earnings amounted to US$1 billion in 2019.

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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)