FDI inflows sink 44% in July – BSP

Foreign direct investment (FDI) inflows into the Philippines dropped significantly in July, falling by 44.1 percent compared to the same period last year, according to preliminary data from the Bangko Sentral ng Pilipinas (BSP). The July figure of $689 million marked a 23.9 percent decline year-on-year, falling from $5.35 billion in the corresponding months of 2022.

This downturn was primarily attributed to weaker equity capital investments and reduced intercompany borrowings, which were outweighed by an increase in retained earnings by foreign investors in their Philippine operations.

Among the major components of FDI, net investments in debt instruments decreased by 49.1 percent to $365 million, while net equity capital investments, excluding reinvested earnings, dropped by 55.5 percent to $186 million. Gross equity placements, or fresh capital injected into Philippine companies, fell to $199 million, and equity withdrawals decreased to $13 million. However, reinvestment of earnings, which saw a 39.9 percent increase to $138 million, was the only major component to grow in July.

For the broader seven-month period (January-July 2023), FDI inflows declined by 23.9 percent to $4.07 billion, down from $5.35 billion in the same period the previous year. The largest FDI component, net investments in debt instruments, saw a 30.6 percent decline to $2.43 billion. Reinvestment of earnings also dropped by 14.2 percent to $968 million, while net equity capital investments excluding reinvested earnings declined by 6.9 percent to $675 million.

Despite this, equity capital placements during the period were primarily sourced from Japan, the United States, and Singapore, primarily targeting manufacturing, financial and insurance activities, and real estate.