Net inflows of foreign direct investments dropped 41 percent in July to $543 million from $926 million a year ago, pulled down by the lower equity capital placements during the month, the Bangko Sentral ng Pilipinas said Friday.
The BSP said in a statement non-residents’ net investments in debt instruments, composed mainly of inter-company borrowings between affiliates, reached $357 million while non-residents’ net investments in equity capital amounted to $99 million in July.
“On the latter, the level was lower compared to that posted a year ago due to the decrease in equity capital placements by 39.6 percent, to $168 million [from US$278 million] and expansion of equity capital withdrawals by 302.4 percent, to $69 million [from $17 million],” it said.
Equity capital infusions came mostly from Japan, Germany, Singapore, the United States and South Korea and were directed largely to financial and insurance, real estate, manufacturing and human health and social work industries.
Reinvestment of earnings increased by 15.8 percent to $87 million in July from $75 million in the same month last year.
The sluggish FDI performance in July brought the net inflows in the first seven months to $4.1 billion, down 39 percent from $6.8 billion in the same period last year.
“This stemmed from the decline in non-residents’ net investments in equity capital by 75.1 percent to $459 million [from $1.8 billion] and in debt instruments by 30.3 percent to $3.1 billion (from $4.4 billion), reflecting the impact of the weak pace of global economic activity that took toll on investors’ business confidence and investment decisions globally,” BSP said.
Placements of equity capital contracted by 49.2 percent to $1 billion (from $2 billion), and equity capital withdrawals increased by 215.8 percent to $569 million (from $180 million).
Equity capital placements during the period emanated largely from Japan, the United States, Singapore, China, and South Korea. These were channeled mainly to financial and insurance, real estate, manufacturing, transportation and storage, and administrative and support service industries.
Meanwhile, reinvestment of earnings expanded by 12.6 percent to $595 million from $528 million in the same period last year.
BSP Governor Benjamin Diokno earlier expressed optimism that the net inflows of FDIs would hit the target of $9 billion.
Diokno said while the BSP was open to the idea of revising downward the $9 billion target for 2019 because of the poor numbers in the first half, a recovery was expected in the second half.
“I think FDI slowed down because of the second package [of the comprehensive tax reform program], the uncertainty how the second package would look like and because of the [mid-term] elections [when] usually investors were in a wait-and-see mode,” Diokno said.
“But there will be a pickup in the second half.. We are optimistic that net FDI will hit maybe $8 billion or $9 billion for the year. Usually $10 billion net annually, but $8 billion to $9 billion net FDI this year is good enough,” Diokno said.