Net FDI falls to 11-year low

NET foreign direct investments (FDI) markedly dropped in December, data from the Bangko Sentral ng Pilipinas (BSP) showed, with inflows falling to an 11-year low as investors remained wary of external uncertainties.

At $110 million, the net inflow plunged 85.2 percent from the $743 million recorded a year earlier. It was down a higher 87.8 percent from the month earlier $901 million a month earlier.

It was also the lowest net inflow recorded since December 2013’s $102.16 million, BSP data showed.

Net FDI settled at $8.9 billion for the full year, the central bank said, below the $9.0 billion projected for 2024.

The BSP attributed the December plunge to increased debt repayments by resident firms to nonresident direct investors.

Net foreign investments in debt instruments subsequently shifted to a net outflow of $19 million from an inflow of $618 million in December 2023.

Reinvested earnings, meanwhile, also fell by 14.7 percent to $80 million from $94 million.

On the other hand, nonresidents’ net investments in equity capital (excluding reinvested earnings) surged by 58.0 percent to $49 million from $31 million a year ago.

Singapore (42 percent), Japan (23 percent), the United States (16 percent) and South Korea (9.0 percent) accounted for the bulk of the December investments, which were mostly channeled to the information and communication (40 percent), manufacturing (20 percent), financial and insurance (13.0 percent), construction (9.0 percent) and real estate (8.0 percent) sectors.

Year to date, equity capital placements ballooned to $1.54 billion from $1.08 billion a year ago while reinvestments of earnings slipped to $1.17 billion from $1.31 billion. Net investments in debt instruments were also lower at $6.23 billion from $6.53 billion.

The January-December placements originated mostly from Japan (38 percent), the United Kingdom (35 percent), the US (10 percent) and Singapore (8.0 percent).

The bulk, or 68 percent, went to manufacturing, followed by real estate (12 percent) and information and communication (5.0 percent).

Rizal Commercial Banking Corp. chief economist Michael Ricafort said the decline in FDIs could be due to uncertainties surrounding potential protectionist policies under Donald Trump, who a month earlier had won the White House.

“Some foreign investors could have also waited for Fed (Federal Reserve) and BSP rates to go down further before becoming more aggressive to finance more FDIs, amid still relatively higher global and local interest rates,” he added.