Net inflows of foreign direct investments fell 19.2 percent in August to $797 million from $987 million a year ago as global uncertainties and rising interest rates affected investors’ sentiments, the Bangko Sentral ng Pilipinas said Thursday.
This brought the net FDIs in the first eight months to $5.9 billion, or 13 percent lower than $6.8 billion registered in the same period in 2021.
“The slowdown in FDI may be attributed to concerns over weakening global growth prospects, particularly with the moderating demand and policy tightening in major economies,” the BSP said in a statement.
FDI net inflows decreased in August as all major FDI components posted lower net inflows, particularly non-residents’ net investments in debt instruments of local affiliates.
Equity capital placements in August came mostly from Japan and the United States and were channeled largely to manufacturing, real estate and information and communication industries.
Michael Ricafort, chief economist of Rizal Commercial Banking Corp., said higher inflation, weaker peso exchange rate and the sharp increase in global and local interest rates that led to higher borrowing costs dragged new investments.
He said the continuing Russia-Ukraine conflict that led to relatively higher global commodity prices and inflation also dampened investments.
“Net FDIs which just came among the highest since the pandemic started and also came from near record highs on a monthly basis recently could still remain a bright spot for the economy despite the recent soft patch for June to August 2022, as these would still lead to more business/economic activities, as well as leading the creation of more jobs/employment as the economy reopened further towards greater normalcy,” Ricafort said.
Net FDIs reached a record $10.5 billion in 2021, breaching the previous high of $10.3 billion in 2017.
The Bangko Sentral expects net FDIs to reach $10.5 billion in 2022.