Stockbroker SB Equities Inc. expects the full year foreign direct investments (FDI) of the country to hit $6 billion in 2020, down 22 percent from the prior year, before rebounding to $7.5 billion this year.
This follows after it was reported that the 10-month FDI last year amounted to $5.3 billion, 10.2 percent lower than the prior year.
October figures alone posted a six-month low of $423 million, a result of heightened global uncertainty and market volatility amid a resurgence of novel coronavirus cases in the country’s top FDI sources – the United States, Europe and Japan.
“Foreign investors’ net equity placements other than reinvestment of earnings collapsed by nearly 100 percent both on a year-on-year and month-on-month bases to only $1 million in Oct, the lowest since Jan 2019. Furthermore, foreign investors’ reinvestment of earnings fell 20.6 percent while their net debt investments decreased 16.8 percent to $358 million,” SB Equities said.
“We expect FDI performance in the last two months of 2020 to remain challenged by the pandemic and lockdowns, which adversely impacted advanced economies including their outbound FDI flows to the rest of the world,” the stockbroker added.
It said FDI net flows were on track to end 2020 hovering at $6 billion, but unlikely to eclipse the 2019 level of $7.7 billion.
SB Equities said the optimism over an FDI revival this year is “on account of a vibrant global economic recovery buoyed by sustained accommodative monetary policy and more robust fiscal stimulus support in advanced economies.”
It also noted vaccine rollouts in advanced economies such as the US, Euro area, United Kingdom, Japan and Singapore which will help restore business and consumer confidence in these markets and encourage them to push for more outbound foreign investments.
This will be complemented by pending laws like the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill, Foreign Investment Act (FIA), Public Service Act (PSA) and the Retail Trade Liberalization Act (RTLA) which will “spur FDI flows and foreign investor sentiment,” SB Equities said.
A bicameral conference committee is currently harmonizing the Senate and House of Representative versions of the CREATE bill and intends to finalize its report this month.
SB Equities expects CREATE to be signed into law by the President before the end of first quarter.
It also anticipates legislative bills amending the FIA, PSA and RTLA – which have all passed the Lower House and are pending in the Senate – to be discussed further by legislators once the 18th Congress resumes session later this month.
“We believe that enacting CREATE together with amending FIA, PSA, and RTLA will spur FDIs and foreign investor sentiment,” SB Equities said.