Foreign investments drop in March as local COVID-19 outbreak spooks investors

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Metro Manila (CNN Philippines, June 19) — Foreign investments to the Philippines continued to drop in March, with the full-scale coronavirus pandemic dampening investor sentiment.

Foreign direct investments (FDI) declined 18.5 percent to $507 million from the $622 million net inflows recorded in the same period last year, the Bangko Sentral ng Pilipinas said in a statement on Friday.

“The progression of the COVID-19 crisis into a full-scale pandemic and its adverse impact on the global economy dampened investor sentiment and investment activity during the month,” the BSP explained.

The central bank noted that this led to a 33.5 percent decline in investments in debt instruments to $278 million from $419 million in the same period last year.

Reinvestment of earnings also saw a decline in March 2020 by 37.9 percent to $57 million versus $91 million in March 2019.

On the other hand, equity capital placements during the month increased 53.1 percent to $172 million from $112 million in the same period in 2019, the BSP said. It noted that most of the capital placements came from Japan and Taiwan and were invested in administrative and support service, manufacturing, and financial and insurance industries.

With this, first quarter FDI reached $1.7 billion, down 14.2 percent from the $1.9 billion net inflows reported in the same period in 2019.

Prior to the pandemic, the BSP previously projected total FDI to reach $8.8 billion this year.

Union Bank of the Philippines chief economist Ruben Carlo Asuncion said that the quality and credibility of the COVID-19 response will play a key role in boosting investor confidence aside from pending tax reforms and other programs related to such to stimulate investments.

Citing Vietnam as an example, he said that the country was able to recover from the effects of the virus because of its fast containment response.

As for the coming months, Asuncion said it is hard to tell, “but we should be lucky if we can muster half of the biggest ever net FDI inflows of US$10 billion back in 2017.”

The government implemented enhanced community quarantine in Luzon and in other areas across the country mid-March due to the increasing cases of COVID-19. It has also opted for more foreign borrowings to fight the spread of the virus, yet it is confident that it will be able to pay these loans.

BSP Governor Benjamin Diokno earlier said that the country’s sound fiscal and monetary state and modest budget deficit placed it in a string position prior to the pandemic.