PH FDI Loses Momentum Amid Growth Woes

MANILA, Philippines — Net inflow of foreign direct investments in the Philippines fell in the first half, as market volatility and concerns on the country’s growth momentum prompted investors to place their capital elsewhere. Latest data from the Bangko Sentral ng Pilipinas (BSP) showed FDI inflows surpassed outflows by $3.4 billion in the January-June period, falling by nearly 18 percent from the same period last year. READ: FDI sinks to over decade low amid investor jitters The first-half tally accounted for nearly 49 percent of the BSP’s revised full-year estimate of a $7-billion net inflow. In June alone, net inflow amounted to $447 million, a two-month low. FDI is generally viewed as more durable than foreign portfolio investment, which can be quickly withdrawn during periods of market stress. Foreign companies that establish operations or expand existing ones can create jobs and support industrial development, making such investment a key part of the government’s efforts to sustain economic growth. The bulk of the first-half decline came from intercompany borrowings between multinational companies and their Philippine subsidiaries. Such loans fell nearly 26 percent to $2.1 billion. Reinvestment of earnings also dropped 19 percent to $829 million, suggesting that foreign companies were returning more of their profits to parent firms or retaining less money for expansion in the Philippines. Equity investment, however, offered a brighter spot. Equity capital placements, a measure of new foreign investment, reached $725 million, while withdrawals totaled $236 million. That produced a net equity inflow of $489 million, up 59.4 percent from a year earlier. Leonardo Lanzona, an economist at Ateneo de Manila University, said volatility in global financial markets, fueled in part by the conflict in the Middle East, as well as the lingering effects of a recent graft scandal, continued to weigh on the Philippines’ attractiveness to foreign investors. READ: July PH ‘hot money’ net inflow plunges 91% “Elevated US rates and peso depreciation likely reduced the incentive to route working capital through Philippine affiliates as debt, while falling reinvested earnings point to either compressed affiliate profitability or a shift toward repatriating profits rather than reinvesting,” he said. Lanzona remained cautious about the outlook for the rest of the year, pointing to a growing gap between investment pledges and the capital actually flowing into the country. “Absent a clearer BSP easing path, faster post-scandal infrastructure disbursement and resolution on tariff uncertainty, net FDI likely stays subdued, with equity capital the metric to watch for a genuine inflection,” he said. INQ