FOREIGN direct investments (FDI) could roughly sustain estimated 2018 inflows this year as conditions turn more enticing for investors, a senior central bank official said, citing slower inflation and robust domestic activity.
“We are confident that in 2019 — with inflation down, sustained government spending, with consumption expenditure being resilient and robust — we should see more investments coming in,” Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo told reporters on Friday last week.
Net foreign investment inflows amounted to $8.53 billion as of October 2018, 1.8% more than the $8.376 billion received in 2017’s comparable 10 months. FDIs sustained a three-month decline starting August, with October’s $491.37 million equivalent to just a fourth of the $1.904-billion inflows in the same month of 2017.
Foreigners were more comfortable investing in debt instruments while others chose to reinvest earnings. These offset equity withdrawals during the period.
As of November, the central bank expected net FDI inflows to have reached $10.4 billion in 2018 and to hit about $10.2 billion this year. The country received $10.049 billion in 2017.
FDIs are a source of additional capital for the Philippine economy, spurring domestic activity by funding business expansion and generating more jobs.
Mr. Guinigundo said he expects net investment inflows to log “between $9-10 billion” in combined equity capital and placements in debt securities.
Inflation, which has been identified as the biggest problem which the country faced in 2018, is on its way down from a multiyear peak of 6.7% in September and October. The overall rise in prices of widely used goods is projected to drop to 3.2% this year from 2018’s 5.2%, returning to the government’s 2-4% target band.
State spending has been buoyant, with infrastructure and capital outlays up 49.7% as of end-November.
This propped up overall growth to 6.2% for the full year despite a slower pickup in household consumption amid surging inflation.
On the other hand, flighty portfolio investments beat the BSP’s forecasts to log a $1.204-billion net inflow versus $100 million in expected outflows. The central bank said the passage of the first of up to five planned tax reform packages helped lift foreign investors’ sentiment and inspired bigger bets in local equities and other financial instruments in 2018.
Market watchers expect better macroeconomic conditions to attract more foreign money this year, with local financial markets also seen to bounce back from last year. — Melissa L. T. Lopez