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FDI inflows more than double in March



REUTERS

FOREIGN DIRECT investments (FDI) to the Philippines surged in March, largely due to the low base effect from last year’s slump as well as an improvement in investor sentiment.

Data from the Bangko Sentral ng Pilipinas (BSP) showed FDI inflows in March more than doubled to $808 million from $337 million in the same month last year.

March FDI inflows were also a third bigger than the $608 million in February, but 16% smaller than the $961 million in January.

This helped fuel a 45% rise in first-quarter FDI inflows to $2.377 billion, from $1.638 billion in the same period of 2020.

“March 2021 FDI increased on account of improved investor sentiment amid the gradual resumption of domestic activities, while adhering to the minimum health standards, and government efforts to accelerate the vaccination program,” the central bank said.

FDIs infuse additional capital into the economy, which create more jobs and spur business activity.

Analysts attributed the significant improvement to the low base effect, after FDI inflows in March 2020 were affected by the strict lockdown implemented in Luzon at the onset of the pandemic.

“We all know that same time last year, all economic activity stopped as the world dealt with the spread of the coronavirus. Fast forward to this year, one will notice that somehow businesses and consumers have adjusted to the new normal,” UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in an e-mail.

Asian Institute of Management economist John Paolo R. Rivera said the FDI inflows in March reflect an improvement in investor sentiment as authorities appear to have more options to deal with the health crisis.

“This 2021, stakeholders have a better understanding of what is going on and how to respond to the best of their resources and abilities,” Mr. Rivera said.

The BSP attributed the higher FDI net inflows to the surge in investments in debt instruments or inter-company borrowings to $380 million in March, from $45 million in the same month last year.

Equity inflows jumped 52.8% to $349 million, as placements rose 35.9% to $377 million and withdrawals fell 42.6% to $28 million.

Equity capital placements were mainly sourced from Singapore, Japan, the United States, and the Netherlands, the central bank said.

The funds were mainly invested into industries such as electricity, gas, steam, and air-conditioning; financial and insurance; and manufacturing.

Reinvested earnings, or funds which foreign businesses chose to keep here to fuel business expansions, went up 23.3% to $79 million in March.

OUTLOOK
Analysts said FDI outlook in the coming months will depend on the extent of the reopening of key economies as more people get vaccinated against the coronavirus disease 2019.

Mr. Asuncion said more vaccinations in the second half, especially in advanced economies and trading partners, will support FDI inflows in the Philippines.

For his part, Mr. Rivera said investors will look for signs of herd immunity to gauge economic recovery.

Several think tanks have noted the Philippines’ COVID-19 vaccination campaign is one of the laggards in Asia, which may hurt economic recovery prospects.

Moody’s Analytics last week said the country is likely to fully vaccinate 65% of its population only by 2023. Based on data from Johns Hopkins University, only 1.48% of the local population have received two vaccine doses.

This year, the central bank projects FDI inflows to the Philippines will reach $7.8 billion. Inflows in 2020 slumped to a five-year low of $6.542 billion, down by 24.6% from the 2019 level. — L.W.T. Noble

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