Cumulative FDI up 4.4%
Foreign direct investment (FDI) net inflows fell 19.8 percent in November 2024 from a year earlier, the central bank said on Monday amid uncertainty over protectionist measures US President Trump might adopt.
Cumulative FDI for the January-November period rose 4.4 percent year-on-year, the Bangko Sentral ng Pilipinas (BSP) said in a statement.
In November 2024 alone, FDI’s net inflows reached $901 million, down from $1.1 billion recorded in November 2023, the BSP said.
The cumulative FDI level increased by 4.4 percent to $8.6 billion in the January-November 2024 period from $8.2 billion in the corresponding period a year earlier, it said.
Bulk of the equity capital placements in November came from Japan, the United States, and Singapore.
“These investments were primarily channeled into the manufacturing, real estate, financial and insurance, and administrative and support service industries,” the BSP said.
A measure of actual capital that entered the Philippines, FDI refers to investment by a non-resident direct investor in a domestic enterprise, where the equity capital in the latter is at least 10 percent.
FDI also includes investment made by a non-resident subsidiary or associate in its resident direct investor.
The BSP said that non-residents’ net investments in debt instruments contracted by 17.9 percent to $791 million in November 2024 from $964 million in November 2023.
Non-residents’ net investments in equity capital, meanwhile, declined by 58.9 percent to $35 million from $85 million.
Non-residents’ reinvestment of earnings remained broadly stable at $74 million.
BSP explained that net investments in debt instruments consist mainly of intercompany borrowing and lending between foreign direct investors and their subsidiaries or affiliates in the Philippines.
The remaining portion of net investments in debt instruments are investments made by non-resident subsidiaries or associates in their resident direct investors.
“This is known as reverse investment,” BSP said.
$1B still ‘decent’ – analyst
Michael Ricafort, RCBC chief economist, said: “Net FDI close to $1 billion (in November) is still decent and among prepandemic highs that could create more jobs and other business opportunities and also still contribute to further economic growth and development.”
Ricafort said the latest year-on-year and month-on-month declines in the latest FDI data in November 2024 could be attributed to uncertainty over possible protectionist measures that US President Trump might adopt.
“(Trump) encourages more investments and jobs in the US rather than outside the US that could reduce foreign investments globally,” Ricafort said.
Ricafort added that foreign investors were also biding their time on how the law “CREATE MORE,” enacted-on Nov 11, 2024, would impact foreign investment in terms of the tax incentives it offered. (The law is Republic Act No. 12066 or the CREATE MORE, the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy Act.)
“But this would now make foreign investors more decisive on whether or not to locate in the country, going forward,” Ricafort said.
Actual inflows
The BSP explained that its FDI statistics are different from the investment data of other government sources.
“BSP’s FDI covers actual investment inflows. In contrast, the approved foreign investments data published by the Philippine Statistics Authority (PSA) are sourced from Investment Promotion Agencies (IPAs). These represent investment commitments, which may not necessarily be fully realized in a given period,” BSP said.
“The PSA data are not based on the 10-percent foreign ownership criterion as defined by the BSP. Additionally, the BSP’s FDI data are presented in net terms. On the other hand, the PSA’s foreign investment data do not account for equity withdrawals,” the BSP said.
