In what is clearly another sign that the Philippines is the economic weakling among the members of the Association of Southeast Asian Nations (ASEAN), foreign direct investment (FDI) net inflows into the country fell by 18% during the first half of this year, according to a Manila Bulletin news report.
To put things in perspective, posted below is an excerpt from the news report of the Manila Bulletin. Some parts in boldface…
Foreign direct investment (FDI) net inflows into the Philippines contracted 18 percent in the first half of the year to ₱211.3 billion from ₱257.5 billion recorded in the same period last year, weighed down by higher borrowing costs and geopolitical friction.
Data released on Thursday, Sept. 10, by the Bangko Sentral ng Pilipinas (BSP) showed that the cumulative six-month decline was driven by reduced intercompany borrowings and lower retained earnings, which undercut gains in net equity capital investments.
The central bank noted that FDI pulled back on intercompany lending to their domestic subsidiaries while retaining fewer earnings for local reinvestment.
Among individual components, net investments in debt instruments—which include intercompany borrowing between foreign investors and local affiliates—fell 26 percent in the first half to ₱128.8 billion from ₱173.8 billion a year earlier.
Reinvestment of earnings slipped 19 percent over the same period to ₱51.8 billion, compared with ₱64.4 billion in the previous year.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the cumulative decline in foreign inflows largely stemmed from the fallout of war in the Middle East.
Ricafort said the conflict fueled slower economic activity, sustained inflation, and elevated borrowing costs globally, ultimately raising the cost of direct investment.
Despite the broader downward momentum, net equity capital investments excluding reinvested earnings posted a sharp rebound, surging 59.4 percent to ₱30.6 billion from ₱19.2 billion a year ago. Total equity capital placements climbed to ₱45.3 billion, easily outpacing ₱14.8 billion in withdrawals.
Inflows during the first half originated mostly from Japan, the United States (US), and Singapore, with capital primarily directed toward manufacturing, financial and insurance activities, alongside real estate development.
On a monthly basis, FDI rebounded in June, expanding 35 percent year-on-year to ₱27.9 billion. Even with the bounce, June marked the second-lowest monthly total of the first semester.
Let me end this post by asking you readers: What is your reaction to this recent development? What do you think the government’s economic managers should do to attract more FDI? Do you think the Philippines will fall into a recession in 2027 or in the first half of 2028? Are you convinced that hosting the ASEAN Summit will not lead the Philippines to any economic improvements?
You may answer in the comments below. If you prefer to answer privately, you may do so by sending me a direct message online.
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