Foreign direct investments (FDI) for the first five months of 2012 posted a 10.2 percent increase to reach US$844 million, a turnaround from the 14.8 percent decline recorded in January-May 2011. The rise in FDI was driven mainly by equity capital, which yielded net inflows of US$992 million. On a gross basis, equity capital placements surged by almost fourfold to US$1.1 billion in January-May 2012 from US$278 million a year ago. The U.S., Australia, the Netherlands, Japan, and the United Kingdom were the major sources of equity capital flows. These were channeled mostly to the manufacturing, real estate, wholesale and retail trade, and financial and insurance sectors.
Reinvested earnings likewise registered a cumulative net inflow of US$51 million. However, this was lower by more than 65 percent than the level posted in the comparable period a year ago.
Meanwhile, the other capital account—consisting mainly of intercompany borrowing/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines—posted net outflows of US$199 million, largely on account of the settlement of trade credits extended to local firms by their affiliates abroad. This represented a reversal of the US$378 million net inflows recorded last year.
FDI in May 2012 yielded net inflows of US$7 million, markedly lower than the US$195 million net inflows registered in the same month last year. Investor sentiment remained subdued on the back of continued concerns over developments in some advanced economies, particularly the interlocking sovereign debt and banking crisis in the euro area. This developed notwithstanding the positive developments in the local front, including news of the country’s better-than-expected economic growth performance in the first quarter of 2012 and Moody’s positive credit rating action during the month. Net inflows in May were driven largely by the equity capital account which posted US$48 million net inflows. Reinvested earnings likewise registered US$9 million in net inflows. On the other hand, the other capital account recorded net outflows of US$50 million due to repayments of intercompany loans from foreign direct investors by their subsidiaries/affiliates in the Philippines.