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FDI climbs to 7-month high in July

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Foreign direct investments picked up for a third straight month in July, data from the central bank showed. Photo taken in Bonifacio Global City, Taguig on Sept. 22. — REUTERS/ELOISA LOPEZ

By Luz Wendy T. Noble, Reporter

FOREIGN DIRECT investment (FDI) net inflows reached a seven-month high in July, as investor sentiment improved slightly with the economy’s gradual reopening.

July also saw the third straight month of growth in FDI net inflows, but this was not enough to reverse the 11% year-to-date slump for the first seven months due to the coronavirus pandemic.

FDI net inflows jumped by 35% to $797 million in July from $590 million a year ago, data from the Bangko Sentral ng Pilipinas (BSP) showed. This was 65.7% higher than the $481 million in net inflows in June, and the highest since the $1.153 billion in December 2019.

“The FDI net inflows rose for the third consecutive month on the back of investors’ improving sentiment due in part to easing of containment measures, and some signs of gradual improvements in economic activity based on high-frequency indicators,” the BSP said in a statement.

For the first seven months of the year, FDI net inflows declined by 11% to $3.795 billion from the $4.259 billion during the same period in 2019.

The BSP expects to see FDI net inflows worth $4.1 billion this year, less than half the $8.8 billion outlook it gave last year before the pandemic.

The higher FDI inflows in July was attributed to the 60% surge in net investments in debt instruments to $643 million.

Equity other than reinvestment of earnings dropped 19.6% to $81 million in July, as placements shrank 47.7% to $89 million and withdrawals plunged 88.7% to $8 million.

Top sources for equity capital placements during the month were Japan, China, and the United States, the BSP said.

“These were channeled largely to the construction, real estate, wholesale and retail trade, and manufacturing industries,” it added.

Reinvestment of earnings was also down 16.1% to $73 million in July.

Meanwhile, FDI that flowed into equity and investment fund shares fell 18% to $154 million during the month.

“We can attribute the pickup of late to some pent-up investment outlays now that the economy is opening up gradually, but we remain skeptical of a sustained strong influx of equity investments for the balance of the year sans an economic rebound both in the Philippines and abroad,”  ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in an e-mail.

The economy slumped to a recession amid the record 16.5% contraction in the second quarter due to the impact of the strict lockdowns. The government expects gross domestic product to shrink by 4.5% to 6.6% this year.

Restriction measures have been eased since June, although strict lockdowns have been reimposed in areas where infections surged.

A recovery in FDI remains uncertain as sentiment is clouded by the pandemic and the lack of vaccine, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said.

“As long as we have the coronavirus hanging over our heads, FDI inflows recovery of non-debt instrument investments will be slow, but may improve as the virus is continuously contained in different parts of the world,” Mr. Asuncion said in an e-mail.

“If the vaccine comes in the early part of 2021 or even earlier, FDI may rebound faster than expected,” he added.

The Philippines had 342,816 coronavirus disease 2019 (COVID-19) cases as of Monday, the highest in Southeast Asia.

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