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FDI flows continue to slide in November

Net inflows of foreign direct investments continued to decline in November, as uncertainty over the coronavirus pandemic continued. — PHILIPPINE STAR/MICHAEL VARCAS

FOREIGN DIRECT investment (FDI) net inflows to the Philippines continued to drop in November, albeit at a slower pace, the Bangko Sentral ng Pilipinas (BSP) said.

Preliminary data from the BSP showed FDI net inflows sank 16.5% to $537 million in November from $643 million in the same month a year ago. However, this decline was slower than the 24.5% contraction seen in October.

“The recent contractions in net FDI inflows were largely affected by concerns over the resurgence of COVID-19 (coronavirus disease 2019) cases and re-imposition of quarantine measures in some advanced and emerging markets,” the central bank said in a statement.

FDI net inflows in November reached a three-month high since the August level of $637 million. This was also 27% higher than the $423 million worth of flows in October.

For the 11-month period, FDI net inflows fell 10.8% to $5.792 billion from the $6.493 billion logged a year earlier. This already surpassed the BSP’s projection of $5.6 billion for FDIs for the whole of 2020.

Among FDI components, equity other than reinvestment of earnings saw the steepest annual fall of 57.3% to $66 million in November, although this was significantly higher than the $1 million in October. This, as placements dropped 44.8% to $96 million while withdrawals jumped 57.3% to $30 million.

Equity capital placements during the month mostly came from Japan, the Netherlands, the United States, and Singapore. These inflows were mainly invested into manufacturing, real estate, and financial and insurance industries.

FDI flows to equity and investment fund shares also shrank 49.7% to $122 million in November from $243 million a year ago.

Meanwhile, reinvestment of earnings declined 36.5% to $56 million from $88 million a year ago.

Investments that went to debt instruments saw a 3.8% growth to $415 million in November from $400 million a year ago.

Recovery prospects for FDI in the coming months remain clouded by the risk-off sentiment caused by the new COVID-19 variants that appear to be more contagious, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a note.

For Asian Institute of Management Economist John Paolo R. Rivera, investors remain wary of pouring funds into the country given its handling of the pandemic, and the slow pace of securing COVID-19 vaccines.

The Philippines is planning to start vaccination within the month. Neighboring countries including Singapore, Malaysia and Myanmar have already started inoculating their citizens.

The number of COVID-19 cases reached 543,282 as of Thursday, the second highest in Southeast Asia after Indonesia.

“If we cannot project and ensure a more definite national plan relative to other economies, an increase in FDI inflows may be far fetched. We can expect a rebound once a specific inoculation plan has been established and carried out,” Mr. Rivera said in a text message. — Luz Wendy T. Noble

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