By Keisha B. Ta-asan, Reporter

FOREIGN DIRECT INVESTMENT net inflows hit a six-month high in October that tempered a year-to-date contraction, according to data which the Bangko Sentral ng Pilipinas (BSP) released on Wednesday.

Data from the BSP showed FDI net inflows jumped by 6.3% to $923 million in October, from $868 million a year earlier. This was also 47.4% higher than the $626-million net inflows in September.

The October figure was the highest monthly net FDI inflow in six months, or since $1.024 billion in April. 

Net Foreign Direct Investment (Oct. 2022)“Despite the global economic headwinds, FDI net inflows rose on account of the increase in nonresidents’ net investments in debt instruments and equity capital of their local affiliates,” the BSP said in a statement.   

Nonresidents’ net investments in debt instruments of local affiliates went up by 5% to $667 million from $635 million a year earlier. 

Investments in equity and investment fund shares increased by 10% to $255 million, from $232 million a year ago.

“Direct investment flows tend to move this way especially as a particular investment flow can move the entire total,” ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in an e-mail. “One good development would be that the latest figure shows fresh placements.”

Equity other than reinvested earnings jumped by 21% year on year to $170 million in October from $141 million a year ago. Gross placements climbed by 22% to $188 million, but withdrawals rose by 32.9% to $18 million.

Equity capital infusions mostly came from Japan, the United States and Singapore, the BSP said. These were mostly invested in industries such as electricity, gas, steam and air-conditioning supply (31%), manufacturing (29%), information and communications (16%), and real estate (11%).

Meanwhile, reinvestment of earnings declined by 6.8% to $85 million from $92 million a year ago.

“The sustained increase in FDI may be attributed to the economic reopening and a favorable business environment in the leadup to the holiday season,” Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.

“The improving unemployment rate and a strong (third-quarter gross domestic product) may have attracted foreign investors despite inflation, plus a weaker peso may have played a role,” he added.   

Despite elevated inflation, the economy expanded by 7.6% in the third quarter, bringing the year-to-date average to 7.7%. Economic managers expect the full-year growth to exceed its 6.5-7.5% target for 2022.

The country’s unemployment rate eased to a record low of 4.5% in October, data from the Philippine Statistics Authority (PSA) showed.

The peso continued to depreciate against the US dollar in October, closing at a record low of P59 on Oct. 17. It closed at P57.97 on Oct. 28, appreciating by P0.655 or 1.13% from its Sept. 30 close of P58.625.

“For data in the remaining months of 2022, FDI is expected to remain in net inflow with economic activity perceived to be even stronger than in the third quarter,” Mr. Roces added.   

For the January-to-October period, FDI net inflows declined by 8.3% to $7.635 billion, BSP data showed.

“On a cumulative basis, however, FDI net inflows dipped by 8.3% to $7.6 billion from the $8.3-billion net inflows recorded in January-October 2021, as all components of FDI posted declines,” the central bank said.

BSP data showed foreign investments in debt instruments slumped by 10.2% to $5.361 billion in the first 10 months from $5.969 billion a year ago. 

Investments in equity and investment fund shares dipped by 3.7% to $2.274 billion. 

Net foreign investments in equity capital dipped by 0.3% to $1.265 billion. Equity capital placements slipped by 8.9% to $1.475 billion, while withdrawals plunged by 40.1% to $210 million. 

Most of these placements during the 10-month period were from Japan, Singapore and the United States. 

Reinvested earnings for the January-to-October period fell by 7.6% year on year to $1.009 billion.

“Meanwhile, we hope that we can string together additional months of positive growth to offset the year-to-date contraction in FDI,” Mr. Mapa said. “Slower FDI this year likely due to concerns about slowing global growth and rising borrowing costs.”    

The BSP expects FDI net inflows to have reached $8.5 billion at the end of 2022, and $11 billion by end-2023.