By means of Luisa Maria Jacinta C. Jocson, Reporter
Net foreign direct investment (FDI) inflows fell to the lowest level in more than four years in September, data from the Bangko Sentral ng Pilipinas (BSP) showed.
The central bank said on Tuesday that net foreign direct investment inflows fell 36.2% to $368 million in September, compared with $577 million in the same month a year ago.
This was also the lowest monthly foreign direct investment inflows in 53 months or since the $314 million recorded in April 2020. As a reminder, strict lockdowns were in place in April 2020 to combat the spread of the coronavirus disease 2019 (COVID-19).
Month on month, net inflows also fell 54.8% from $815 million.
“The decline in net foreign direct investment inflows in September 2024 was largely due to the decline in non-residents’ net investments in debt instruments,” the BSP said.
Net investment by non-residents in local branch debt instruments fell 32.8% to $277 million in September, compared with $413 million a year earlier.
Net equity investment, excluding reinvestment of profits, fell 91.2% to $7 million in September, compared to $83 million a year earlier.
Equity placements fell 53.4% year-on-year to $82 million, while withdrawals fell 19.7% to $75 million.
Per source, equity placements came mainly from Japan (60%), followed by the United States (25%) and Singapore (8%).
These were mainly invested in industry (58%), real estate (19%), information and communications (8%), and wholesale and retail trade (5%).
Meanwhile, investments in stocks and mutual fund shares totaled $91 million in September, down 44.6% from $164 million a year ago.
On the other hand, reinvestment of profits rose 3.6% to $84 million in September, compared to $81 million last year.
NINE MONTHS FDI
During the first nine months of the year, net foreign direct investment inflows rose 3.8% to $6.66 billion, compared to $6.42 billion in the same period a year ago.
Investments in stocks and mutual fund shares rose 20.4% to $2.3 billion in the period ended September, compared with $1.91 billion a year ago.
Net foreign equity investments rose 46.9% to $1.36 billion at the end of September, compared to $923 million a year ago.
This comes as equity placements rose 28.1% to $1.79 billion, while withdrawals fell 8.5% to $434 million.
Over the nine-month period, these placements mainly came from the United Kingdom (43%), Japan (37%), the United States (9%) and Singapore (4%).
Meanwhile, foreign investment in debt instruments fell 3.3% from $4.5 billion to $4.35 billion in the January-September period.
Earnings reinvestment fell 4.2% to $949 million at the end of September, compared to $991 million a year ago.
“The relatively lower inflows of foreign direct investment could be largely driven by a wait-and-see attitude of some foreign investors as they wait for the CREATE MORE to be passed into law,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said. Viber message.
In November, President Ferdinand R. Marcos Jr. signed the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act, which expands tax incentives and reduces corporate taxes for certain foreign companies.
Mr Ricafort also points to “still relatively high” interest rates, which may have weighed on foreign investment.
The BSP started its rate cutting cycle in August this year with a 25 basis point rate cut. Later, a further cut of 25 basis points was made in October, bringing the policy rate to 6%.
“Persistently high global interest rates, led by the U.S. Fed, have made investments in emerging markets like the Philippines less attractive,” said John Paolo R. Rivera, senior research fellow at the Philippine Institute for Development Studies.
“Investors often prefer safe-haven assets in advanced economies under these conditions,” he added.
The US Federal Reserve started its easing cycle in mid-September with a 50 basis point interest rate cut.
Mr. Rivera also noted that “heightened geopolitical tensions and economic uncertainties may also have further dampened investor confidence globally.”
“Similarly, slowing economic growth could have raised concerns among foreign investors. Economic growth was slightly weaker than expected in the third quarter of 2024, which may have affected investment sentiment,” he added.
The Philippine economy grew weaker than expected by 5.2% in the July-September period, the slowest growth in five quarters or since the 4.3% expansion in the second quarter of 2023.
“For the coming months, the CREATE MORE Act would now make international investors more decisive to locate in the country with better incentives that could better compete with other Asian countries,” Ricafort said.
Further interest rate cuts by the BSP and the Fed would also increase loan demand and attract more foreign direct investment in the future, he added.
The Monetary Board will hold its final policy review on December 19. BSP Governor Eli M. Remolona Jr. has indicated the possibility of lowering interest rates or keeping them stable.
Meanwhile, Reuters reported that traders were pricing in an 86% chance of another quarter-percentage-point rate cut by the Fed at the Dec. 17-18 meeting.
On the other hand, Mr Ricafort denounced the protectionist trade policies of newly elected US President Donald J. Trump.
“More protectionist policies from a Trump presidency starting in 2025 would deter some US companies from investing and creating more jobs outside the US, as would a potential trade war between the US and China or other countries that could disrupt the global economy and slow down. trade,” he added.
Mr Trump has pledged to impose an additional 10% tariff on Chinese goods in an effort to force Beijing to do more to stop the trade of chemicals used to make fentanyl, Reuters reported.
Mr Trump has previously said he would impose tariffs of more than 60% on Chinese goods.
The BSP expects record foreign direct investment net inflows of $10 billion this year.