FOREIGN DIRECT investment (FDI) inflows declined for the first time in eight months in January, as the Omicron-driven surge in coronavirus infections and tighter restrictions dampened investor sentiment.
FDI net inflows dropped by 16% to $819 million from $975 million a year earlier, based on data released by the Bangko Sentral ng Pilipinas (BSP) on Monday evening.
It was the first annual decline in FDI inflows in eight months or since the 20.3% fall to $452 million in May 2021.
“This may be due largely to investor concerns following the resurgence of cases of the highly transmissible Omicron COVID-19 variant in the country and the re-imposition of stricter quarantine measures in early January 2022,” the central bank said in a statement.
The government placed Metro Manila and some provinces under Alert Level 3 in January to curb the spread of the Omicron variant. As COVID-19 cases plunged, restrictions were eased to the most lenient level starting March.
The slump in FDIs was mainly due to the significant drop in equity capital placements during the month, the BSP said.
FDIs in equity capital plunged by 70.3% to $107 million in January from $360 million a year earlier. Placements dropped by 68.2% to $118 million, while withdrawals rose by 6.8% to $11 million.
The equity placements were mainly from Japan, the United States, the Netherlands and Malaysia. These were invested in manufacturing; electricity, gas, steam and air-conditioning; financial and insurance; and real estate industries.
Inflows to equity and investment fund shares also slumped by 58% to $184 million in January from $439 million a year ago.
Meanwhile, reinvestment of earnings dipped by 1.4% to $78 million from $79 million a year earlier.
Among FDI segments, only inflows to debt instruments recorded growth, expanding by 18.3% to $634 million in January from $536 million a year earlier.
Asian Institute of Management economist John Paolo R. Rivera said FDIs might rebound in the next few months as COVID-19 cases continue to drop and business activity improves.
“FDIs should continue to increase given the plateauing of cases, reopening of the economy and better economic prospects for the rest of the year,” he said in a Viber message.
Rizal Commercial Banking Corp. Chief Economist Michael Ricafort said the war in Ukraine might continue to hurt global investor sentiment.
“The Russia-Ukraine war could further disrupt the global supply chains, in terms of some reduction in global trade (both exports and imports), and potential drag on some investment activities as well,” he said in a Viber message.
Global oil prices have soared since Russia invaded Ukraine on Feb. 24. While the Philippines has limited trade and economic ties to Russia and Ukraine, it has been affected by the higher oil and commodity prices.
Investors will also closely watch the outcome of the May national elections.
“This (improving FDI) trend might change depending on who will win — whoever is the preference of the market. Yes, the preference of the people matters, but FDI is a function of the preference of the market and not necessarily of the people,” Mr. Rivera said.
Former Senator Ferdinand R. Marcos, Jr., the son of the country’s late dictator, remains the frontrunner in the presidential elections on May 9.
A Bloomberg survey of economists last month showed Vice-President Leonor G. Robredo was the preferred bet of investors and analysts.
“For planned investments, investors are looking at concrete platforms in the short, medium and long terms, proof of concept that policies materialize and transparency with anti-corruption and anti-red tape that will create a conducive environment for investments,” Mr. Rivera said.
The central bank last month raised its FDI projection for 2022 to $11 billion from $8.5 billion, citing the continued recovery of economic activities and the implementation of investment-friendly reforms.
FDI inflows jumped to an all-time high of $10.5 billion in 2021, rebounding from $6.822 billion in 2020. — Luz Wendy T. Noble