Central bank sees FDI net inflows steady in 2019

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By Melissa Luz T. Lopez
Senior Reporter

FOREIGN direct investment (FDI) net inflows this year will likely match 2018’s level, two senior central bank officials said, citing the May 13 midterm polls and rollout of more infrastructure projects as factors prospective investors will be watching.

FDI net inflows slid by 4.4% to settle at $9.802 billion in 2018 from $10.256 billion the preceding year, the Bangko Sentral ng Pilipinas (BSP) said on Monday.

The amount also settled below the BSP’s $10.4-billion forecast.

New BSP Governor Benjamin E. Diokno said that decline is “nothing to worry about,” noting that it was because of non-recurring investments in the energy sector back in 2017 which led to a 33% drop in equity capital in 2018.

He added that FDIs this year will likely clock in at $10 billion or more, driven by strong appetite.

“There’s a lot of interest in this country. The Philippines is probably going to be one of the fastest-growing countries in this part of the world,” Mr. Diokno said in a television interview.

The BSP sees FDI net inflows reaching $10.2 billion this year, as of November estimates.

The new central bank chief added that he sees seven percent economic growth this year, which would match the low end of the state’s 7-8% target but is definitely better than last year’s 6.2%.

He noted that delays in enacting the 2019 national budget could hamper growth prospects.

The country is currently operating on a reenacted 2018 budget, leaving new programs and big-ticket infrastructure projects unfunded.

Separately, BSP Deputy Governor Diwa C. Guinigundo said that monetary authorities expect FDI net inflows to steady from 2018.

“For 2019, FDIs are projected to be broadly the same as that in 2018, although this will be reassessed in April/May,” Mr. Guinigundo said in a text message.

“There are ‘pull’ factors coming from sustained positive developments in the economy and continuation of PPP (public-private partnership) projects that were approved in previous years, but there also elements of uncertainty from the proposed fiscal incentives rationalization bill and the upcoming 2019 midterm elections that may lead to investors’ wait-and-see stance.”

Foreign business groups attributed the weaker investor appetite last year to jitters over higher commodity prices, the proposed changes to the tax perks regime and global trade tensions.

The May 13 polls will also play a key role for the government’s legislative agenda, given that it will replace half of the 24 Senate seats, the entire House of Representatives, as well as mayors and governors at the local level. — Melissa Luz T. Lopez