Full-Year Reaches US$9.8 Billion in 2018

Foreign direct investments (FDI) registered US$677 million net inflows in December 2018. This level, however, is 4.8 percent lower than the US$712 million net inflows recorded in the same month of 2017. The decline in FDI was due largely to the 57.6 percent drop in net investments of equity capital to US$132 million from US$312 million a year ago.1,2 Equity capital placements during the month originated mainly from Thailand, the United States, Japan, Singapore, and the Netherlands. By economic activity, said placements were invested largely in 1) financial and insurance, 2) electricity, gas, steam and air-conditioning supply, 3) wholesale and retail trade, 4) manufacturing, and 5) real estate industries. Reinvestment of earnings also declined to US$61 million from US$65 million. Meanwhile, net investments in debt instruments (consisting mainly of intercompany borrowings/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines) increased by 44.7 percent to US$484 million in December 2018 from US$335 million in December 2017.

On an annual basis, FDI net inflows reached US$9.8 billion in 2018, down by 4.4 percent from the US$10.3 billion net inflows in 2017. Net investments of equity capital were lower at US$2.3 billion compared to US$3.4 billion recorded in 2017. The bulk of equity capital placements in 2018 were sourced mainly from Singapore, the United States, Hong Kong, Japan, and China. These were channeled primarily to 1) manufacturing, 2) financial and insurance,3) real estate, 4) electricity, gas, steam and air-conditioning supply, and 5) arts, entertainment and recreation industries. Reinvestment of earnings also declined slightly by 0.4 percent to US$859 million in 2018 from US$863 million in 2017. By contrast, net availment of debt instruments rose by 11.3 percent to US$6.7 billion in 2018 from US$6 billion in 2017.

1 Based on the Balance of Payments and International Investment Position Manual, 6th edition (BPM6) which uses the asset and liability principle in the compilation of FDI statistics. Under the asset and liability principle, claims of non-resident direct investment enterprises from resident direct investors are presented as reverse investment under net incurrence of liabilities/non-residents' investments in the Philippines (previously presented in the Balance of Payments Manual, 5th edition (BPM5) as negative entry under assets/residents' investments abroad). Conversely, claims of resident direct investment enterprises from foreign direct investors are presented as reverse investment under net acquisition of financial assets/residents' investments abroad (previously presented as negative entry under liabilities/non-residents' investments in the Philippines).

2 BSP statistics on FDI covers actual investment inflows, which could be in the form of equity capital, reinvestment of earnings, and borrowings between affiliates. In contrast to investment data from other government sources, the BSP's FDI data include investments where ownership by the foreign enterprise is at least 10 percent. Meanwhile, FDI data of Investment Promotion Agencies (IPAs) do not make use of the 10 percent threshold and include borrowings from foreign sources that are non-affiliates of the domestic company. Furthermore, the BSP's FDI data are presented in net terms (i.e., equity capital placements less withdrawals), while the IPAs' FDI do not account fo equity withdrawals.

Source: Bangko Sentral NG Philipinas