FDI Net Inflows in March 2020 Reach US$507 Million; Q1 2020 Net FDI Inflows at US$1.7 Billion

In March 2020, net inflows of foreign direct investment (FDI) reached US$507 million, 18.5 percent lower than the US$622 million net inflows registered in March 2019.1,2  The progression of the COVID-19 crisis into a full-scale pandemic and its adverse impact on the global economy dampened investor sentiment and investment activity during the month. The decline in total FDI net inflows was largely due to the 33.5 percent reduction in net investments in debt instruments to US$278 million from US$419 million in the same month last year.3 Similarly, reinvestment of earnings fell by 37.9 percent to US$57 million from US$91 million.


Meanwhile, net equity capital placements increased by 53.1 percent to US$172 million in March 2020 from US$112 million posted in March 2019. Equity capital placements originated mostly from Japan and Taiwan. These were invested mainly in the 1) administrative and support service, 2) manufacturing, and 3) financial and insurance industries.


For the first quarter of 2020, FDI net inflows contracted by 14.2 percent to US$1.7 billion from the US$1.9 billion net inflows in the comparable period last year. This developed on account of the 41 percent decline in net investments in debt instruments to US$828 million from US$1.4 billion.3  Likewise, reinvestment of earnings dipped by 24.1 percent to US$187 million from US$247 million in the previous year.


The FDI downturn was mitigated partly by the 120.7 percent growth in net equity capital placements to US$653 million from US$296 million. In particular, gross placements expanded by 22.8 percent to US$714 million (from US$582 million) and withdrawals decreased by 78.6 percent to US$61 million (from US$286 million). The source countries of the bulk of the equity capital placements during the period were the Netherlands, Japan, and Singapore. Said placements were channeled mainly to the 1) manufacturing, 2) administrative and support service, and 3) real estate industries.



1 The BSP statistics on FDI are compiled based on the Balance of Payments and International Investment Position Manual, 6th Edition (BPM6).  FDI includes (a) investment by a non-resident direct investor in a resident enterprise, whose equity capital in the latter is at least 10 percent, and (b) investment made by a non-resident subsidiary/associate in its resident direct investor.  FDI can be in the form of equity capital, reinvestment of earnings, and borrowings.


2 The BSP FDI statistics are distinct from the investment data of other government sources. BSP FDI covers actual investment inflows. By 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.


3  Net investments in debt instruments consist mainly of intercompany borrowing/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines. The remaining small portion of net investments in debt instruments are investments made by non-resident subsidiares/associates in their resident direct investors.


Source: Bangko Sentral ng Pilipinas (BSP)