By means of Aaron Michael C. Sy, Reporter
PHILIPPINE Foreign Direct Investment (FDI) net inFThe low fell to a more than four-year low in June amid lower placements across all instruments, the Bangko Sentral ng Pilipinas (BSP) said on Tuesday.
Inflows fell 29% to $394 million from $555 million a year ago, preliminary data from the BSP showed.
Month after month, net inFThe lows fell 27.55% from $510 million in May.
June has just arrivedFThe lowest level was the lowest since the $314 million recorded in April 2020.
“The decline was due to lower net incomeFlows in all major FDI components,” the BSP said.
Net investment by non-residents in debt instruments fell 30% year-on-year from $304 million to $213 million in June, central bank data showed. These mainly consist of loans between foreign direct investors and their subsidiaries or affiliates in the Philippines.
Net equity investments, excluding reinvestment of profits, also fell 33.2% to $74 million, compared to $111 million a year ago.
Equity placements fell 34.09% year-on-year to $87 million, while withdrawals fell 38.1% to $13 million.
Reinvestment of profits also fell 23.4% to $107 million, compared to $140 million a year ago, while investments in stocks and shares in mutual funds fell 27.89% to $181 million.
By source, equity placements came mainly from Japan (47%), followed by the United States (15%), Sweden (14%) and Singapore (14%).
These were mainly invested in the industry (48%), real estate (18%), wholesale and retail trade (16%) and the financial and insurance sectors (11%).
NET INFLOW INCREASES IN THE FIRST HALF YEAR
Meanwhile, in the Ffirst semester net foreign direct investmentFThe lows rose 7.9% to $4.4 billion from $4.1 billion a year earlier, BSP data showed.
Investments in stocks and mutual fund shares rose 32.7% year-on-year to $1.71 billion from January to June.
Net foreign equity investment rose 62% to $1.197 billion in the six-month period. Placements rose 57.9% to $1.158 billion and withdrawals rose 41.5% to $261 million.
These placements mainly came from the United Kingdom (52%), followed by Japan (30%) and the United States (7%), and were mainly invested in the manufacturing (77%) and real estate sectors (10%).
Meanwhile, net investments in debt instruments fell 3.4% to $2.725 billion in the US Ffirst half of $2.821 billion a year ago.
Earnings reinvestment also fell 6.7% to $514 million.
Net foreign direct investment inflows declined in June due to higher interest rates as the market was still uncertain about the start of monetary easing cycles from both the BSP and the US Federal Reserve, according to Michael L. Ricafort , Chief Economist of Rizal Commercial Banking Corp. in a Viber message.
The Monetary Board cut the policy rate by 25 basis points (bps) to 6.25% on August 15, the first easing measure in almost four years. Before the cut, the BSP kept its policy rate at a more than 17-year high of 6.5% for six consecutive meetings, following cumulative hikes worth 450 basis points between May 2022 and October 2023 to rein in rates.Flat.
BSP Governor Eli M. Remolona, Jr. has said it could cut rates by another 25 basis points within a year. The last two policy-setting meetings of the Monetary Board this year are on October 17 and December 19.
Meanwhile, the Fed is widely expected to begin its easing cycle at its September 17-18 policy meeting, with markets pricing in a 25 basis point cut and a 100 basis point cut for this year at the revision. The U.S. central bank has kept the federal funds target rate at a range of 5.25%-5.5% after raising 525 basis points between March 2022 and July 2023.
Still, foreign direct investment inflows grew year on year in the six months ended June as the Philippines posted robust economic growth last quarter compared with other countries in the region, Mr. Ricafort said.
Philippine gross domestic product (GDP) grew 6.3% in the second quarter Fgrowth in the first half of the year to 6% and therefore at the bottom of the government target of 6-7% for this year.
At 6.3%, the Philippines’ GDP growth was the second fastest in the April to June period, behind Vietnam (6.9%). It was ahead of Malaysia (5.8%), Indonesia (5%) and China (4.7%).
“Over the coming months, further cuts in BSP and Fed interest rates amid the declining inflation trend would further reduce borrowing costs, helping to stimulate greater global investment, business and other economic activity worldwide, thereby helping foreign to encourage direct investment,” said Mr Ricafort. said.
“We expect [FDIs] to improve as we have seen so far in July and August, especially since the BSP implemented a rate cut within the said period,” said Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion. in a Viber message.
The central bank expects to end 2024 with net foreign direct investment of $9.5 billionFlows. Net in 2023FThe lows fell 6.6% year over year to $8.9 billion.