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FDI Posts Net Inflows of US$752 Million in August 2018 & US$7.4 Billion in the First Eight Months of 2018

11.12.2018

Foreign direct investments (FDI) continued to post net inflows in August 2018, amounting to US$752 million, albeit 41.2 percent lower than the US$1.3 billion net inflows recorded in the same period last year.1,2 Even as all FDI components registered positive balances, inflows were lower than the levels posted in August 2017. The bulk of the FDI net inflows for the month was in the form of investments in debt instruments (consisting mainly of intercompany borrowings/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines), which reached US$534 million. Net equity capital investments declined to US$172 million from US$652 million in the same month last year as gross placements (US$187 million from US$671 million) outweighed withdrawals (US$16 million from US$19 million). Equity capital infusions came mostly from Singapore, the United States, Japan, Hong Kong and China. These were invested mainly into firms engaged in manufacturing, real estate, electricity, gas, steam and air-conditioning supply, information and communication, and financial and insurance activities. Reinvestment of earnings totaled US$47 million during the month.

On a cumulative basis, FDI net inflows reached US$7.4 billion for the period January–August 2018, 31 percent higher than the US$5.7 billion net inflows registered last year. FDI inflows remained strong amid continued favorable investor sentiment on the Philippine economy on the back of the country’s strong macroeconomic fundamentals and growth prospects. In particular, net equity capital investments grew more than twice to US$2 billion from US$990 million in 2017. This resulted as equity capital placements increased by 63.7 percent to US$2.2 billion, while withdrawals declined by 45.9 percent to US$196 million. Equity capital infusions during the period emanated mainly from Singapore, Hong Kong, the United States, Japan, and China. Over the first eight months, said investments were channeled mostly into firms engaged in manufacturing, financial and insurance, real estate, arts, entertainment and recreation, and electricity, gas, steam and air-conditioning supply activities. Investments in debt instruments increased by 17.9 percent to US$4.9 billion from US$4.1 billion last year. Meanwhile, reinvestment of earnings reached US$536 million during the period.

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1 Based on the Balance of Payments and International Investment Position Manual, 6th edition (BPM6) which uses the asset and liability principle in the compilation of FDI statistics.  Under the asset and liability principle, claims of non-resident direct investment enterprises from resident direct investors are presented as reverse investment under net incurrence of liabilities/non-residents’ investments in the Philippines (previously presented in the Balance of Payments Manual, 5th edition (BPM5) as negative entry under assets/residents’ investments abroad).  Conversely, claims of resident direct investment enterprises from foreign direct investors are presented as reverse investment under net acquisition of financial assets/residents’ investments abroad (previously presented as negative entry under liabilities/non-residents’ investments in the Philippines). 

2 BSP statistics on FDI covers actual investment inflows, which could be in the form of equity capital, reinvestment of earnings, and borrowings between affiliates.  In contrast to investment data from other government sources, the BSP’s FDI data include investments where ownership by the foreign enterprise is at least 10 percent. Meanwhile, FDI data of Investment Promotion Agencies (IPAs) do not make use of the 10 percent threshold and include borrowings from foreign sources that are non-affiliates of the domestic company. Furthermore, the BSP’s FDI data are presented in net terms (i.e., equity capital placements less withdrawals), while the IPAs’ FDI do not account for equity withdrawals.

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