FDI grow 46.3% in February, 2-month inflows at $1.7 billion

LONG-TERM investments made by foreign investors to the Philippines grew strongly in February this year, reversing the decline seen earlier in 2022, the Bangko Sentral ng Pilipinas (BSP) reported.

Data released by the Central Bank showed that foreign direct investments (FDI) net inflows rose by 46.3 percent from last year, to reach $893 million in February 2022 from the $611-million net inflows recorded in the same month last year.

The increase brought the cumulative two-month FDI net inflows to $1.7 billion, higher by 8 percent than the $1.6-billion net inflows posted in the first two months of 2021. It also reversed the 16-percent decline seen in FDI in January this year.

FDI are investments made by foreign players to the Philippines in the hopes of long-term return.

Since these are in the country for a longer-term compared to their short-term counterpart—the foreign portfolio investments (FPI)—the FDI usually create jobs for Filipinos and have a multiplier effect on the economy.

“The growth in FDI reflected mainly the continued infusion of funds by non-resident direct investors to their local subsidiaries,” the BSP said in a statement.

Broken down, the increase in FDI net inflows in February was supported by the 40.8 percent growth in non-residents’ net investments in debt instruments of local affiliates to $722 million from $513 million in the same month last year.

Non-residents’ net investments in equity capital other than reinvestment of earnings also grew by 320.1 percent to $97 million from $23 million in February 2021.

Equity capital placements were mostly from Kuwait, Japan, and the United States. Capital infusions were channeled mainly to the financial and insurance; 2) manufacturing; and 3) real estate industries. Meanwhile, reinvestment of earnings declined to $74 million from $75 million in the same month last year.

Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort said for the coming months, FDI could still continue to go up amid better global economic prospects as some developed countries that are the major sources of FDI move towards herd immunity.

“Economies locally and in many countries around the world have further picked up and reopened towards greater normalcy, thereby allowing more inflows of FDI into the Philippines, as facilitated by improvements in the global supply chains and logistics since then,” he said.

Image credits: CNN Philippiness