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Net foreign direct investments biggest in six months in April

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FOREIGN DIRECT INVESTMENTS (FDI) inflows rose further in April to a six-month peak, the central bank said in a statement on Tuesday, supported by solid investor optimism towards the Philippines.

Net FDI inflows reached $1.027 billion for the month, surging from the $682 million in March but 3.2% less than the $1.062-billion inbound capital recorded in April 2017, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Inflows marked the third straight month of increase and were the largest seen since October’s $1.918 billion.

Investors grew more bullish about Philippine prospects as they poured more funds into equity.

Total equity investments reached $262 million in April, almost triple the $84 million tallied a year ago. These inflows were partly offset by $15 million in withdrawn capital, versus $14 million the prior year.

This yielded $247 million in net equity capital that was nearly four times bigger than the $70 million in April 2017.

FDI in the PH

Investors from Singapore, Hong Kong, the Netherlands, the United States and Japan were the biggest sources of fresh capital in April, the BSP said. Funds went to manufacturing; arts, entertainment and recreation; real estate; financial and insurance; and wholesale and retail trade activities.

The surge in equity infusions more than offset declines in other investment components.

Reinvested earnings slipped by 7.1% to $75 million from $81 million.

Lending by foreign companies to their Philippine subsidiaries and affiliates saw a bigger 22.6% fall to $705 million from $911 million the past year.

Despite April’s decline, year-to-date FDIs still settled 24.3% higher at $3.202 billion from $2.577 billion in 2017’s comparable four months.

Net equity placements grew sixfold to $1.134 billion as of April from $199 million in the 2017’s first four months, as total placements increased more than fourfold to $1.258 billion from $285 million and total withdrawals increased by a slower 43.4% to $124 million from $86 million.

The same comparable four months saw foreign companies’ investments in their Philippine units’ debt instruments going down 14.6% to $1.8 billion from $2.104 billion and reinvested earnings slipping by 2.1% to $268 million from $274 million.

“FDI inflows were boosted by continued favorable investor sentiment on the back of the country’s solid macroeconomic fundamentals and growth prospects,” the central bank said in its statement.

Such investments — which are longer term than foreign portfolio investments that come and go with ease in the face of breaking developments and news and, hence, are labelled as “hot money” — inject additional capital to the local economy, spurring business expansion and, in turn, generating more jobs.

The Philippine economy expanded by 6.8% in the first quarter, fueled partly by industry expansion, the Philippine Statistics Authority said.

This compares to the government’s 7-8% growth goal, largely supported by P1.068 trillion in infrastructure investments for 2018.

Economic managers have said that they expect growth to have accelerated to seven percent last quarter given a fresh boost from government spending as more infrastructure projects are rolled out.

The central bank expects full-year FDIs to reach $9.2 billion this year, coming from the record $10.049 billion in 2017.

London-based Capital Economics has flagged that persistent political noise and relatively unstable policy in the Philippines could turn off investors and “hold back” the economy, but acknowledged that it has not seen such impact on growth so far. — Melissa Luz T. Lopez