Foreign direct investments (FDI) continued to post a net inflow of US$48 million in March 2007, bringing the cumulative three-month level to US$710 million. The first quarter FDI net inflows grew by 18.5 percent year-on-year. The sustained FDI net inflows in March reflected the country’s solid macroeconomic fundamentals. The March 2007 net inflows were, however, lower than the level during the comparable period in 2006 as some foreign investors could have stayed in the sidelines in the meantime while awaiting the outcome of the electoral exercise in May.
The increase in FDI net inflows during the first quarter resulted mainly from a more than twofold increase in net equity capital at US$682 million. In particular, placements of equity capital almost doubled to US$755 million from US$382 million during same period last year. The bulk of these investments came from the U.S., Japan, Singapore, and Korea. Major recipient industries included manufacturing (electronics, health products), services (international courier, information technology development), mining, real estate, financial intermediation, agriculture and construction.
Reinvested earnings remained positive at US$8 million, albeit lower by about 50 percent than the year-ago level of US$17 million. The balance of the other capital account, the bulk of which were loans granted by head offices to their subsidiaries in the Philippines, amounted to US$20 million, lower relative to the level last year as subsidiaries paid off some of their maturing loans.
Looking ahead, FDI inflows are expected to remain strong for the rest of 2007, given the string of positive first quarter developments (such as favorable corporate earnings, buoyant GDP growth of 6.9 percent, and stable prices). This should help promote an economic environment of continued non-inflationary growth.