FOREIGN direct investments (FDI) in the Philippines may dwindle this year as companies around the world suspend their expansion plans amid a coronavirus disease 2019 (COVID-19) outbreak that threatens global growth, according to Philippine central bank Governor Benjamin E. Diokno.

“We expect FDI to continue to slow down due to mounting uncertainties in the global environment,” he said in a speech at a Manila Times forum on Tuesday. He added that these uncertainties continue to dampen investor sentiment here and abroad.

Global FDIs have fallen because companies from around the globe have been putting their expansion plans on hold, Mr. Diokno told reporters on the sidelines of the forum.

FDI net inflow in the 11 months through November last year dropped by 30% to $6.413 billion due to global uncertainties, local regulatory issues and as investors await passage of a measure seeking to lower corporate income tax.

The Corporate Income Tax and Incentives Rationalization Act (CITIRA), which legislators seek to pass before they go on a Holy Week break this March, will gradually cut the corporate income tax to 20% from 30%.

The Bangko Sentral ng Pilipinas (BSP) is targeting $8.8 billion worth of FDI inflows this year, higher than last year’s goal of $6.8 billion.

In his speech, Mr. Diokno said a synchronized global economic slowdown, the return of multilateralism and rising geopolitical tensions between the US and Iran are risks to inflation and economic growth.

The COVID-19 outbreak that has killed more than 3,000 people and sickened about 90,000 more, mostly in China, is also a risk, he said.

The central bank chief also noted that on the domestic front, “the failure to enhance disaster resilience amid increased intensity and frequency of natural hazards and failure to deliver the planned ‘Build, Build, Build’ projects are among the key challenges that are on our radar screen.”

Fitch Solutions Macro Research has downgraded its growth forecast for the Philippines after initially upgrading its outlook in January.

Socioeconomic Planning Secretary Ernesto M. Pernia on Monday said the outbreak could shave up to a percentage point from gross domestic product (GDP) growth if it persists until yearend.

Mr. Pernia said this was based on a scenario where inbound Chinese tourists are totally cut and foreign tourist arrivals are trimmed by 10%, while trade is “drastically reduced.”

Mr. Diokno said BSP would reassess the situation as the outbreak expands to other countries outside China. He added that the central bank’s initial assessment compared the virus with the severe acute respiratory syndrome in 2003, when China was not yet a significant player in the global economy.

Mr. Diokno last month said the outbreak could dent growth in the next two quarters by an average 0.3 percentage point if it persists up to June.

In an e-mailed note on Tuesday, Fitch Solutions said it had revised its economic growth outlook for the Philippines this year to 6% from the 6.3% forecast in January.

“The export sector, specifically tourism, is likely to see intense headwinds from the outbreak, while infrastructure projects could face delays and households receive weaker remittance inflows,” it said.

Its latest forecast is slower than the government’s 6.5-7.5% goal for the year.

The Philippine economy expanded 5.9% last year, missing the government’s 6-6.5% target due to China-US trade tensions, sluggish FDI inflows, the pass-through effects of monetary tightening in 2018 and a delayed 2019 budget, Fitch Solutions said.

It said growth this year would be buoyed by higher government spending paired with a budget boost.

“We expect fiscal stimulus to be a key driver of growth, with government consumption set to contribute a forecast two percentage points to headline growth,” Fitch Solutions said.

Mr. Diokno earlier said he preferred fiscal over monetary stimulus to shield the economy from the effects of the virus outbreak.

The National Economic and Development Authority last month said the tourism sector could lose about P22.7 billion in monthly revenue because of the outbreak.

The Tourism department had estimated P42.9 billion in losses from February to April as flights got canceled and events were postponed. — Luz Wendy T. Noble

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