Foreign investments pick up in June as economies reopen – BSP

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Metro Manila (CNN Philippines, September 15) — Foreign investments sustained its climb in June, the Bangko Sentral ng Pilipinas said on Tuesday.

Inflows rose by 7.1 percent to $481 million for the month, the highest since March and within the period of the COVID-19 pandemic. The central bank attributed the increase to the gradual reopening of advanced economies to foreigners "with investment interest in the Philippines," saying they wanted to cash in on the country's strong economic fundamentals.

President Rodrigo Duterte lifted strict lockdown rules in Metro Manila and nearby economic hubs in June after placing most of the country under strict stay-at-home rules for over two months to contain the spread of the coronavirus. This paralyzed economic activities and led to a 9 percent contraction during the first semester.

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Equity placements soared during the period, surging fivefold to $173 million from a mere $29 million a year ago. Gross placements hit $185 million, while only $12 million funds were withdrawn by investors.

Global investors preferred the manufacturing sector, followed by human health and social work, financial and insurance, and real estate. By source, the biggest bets came from investors from Japan, the United Kingdom, and the United States.

However, more foreign firms decided to retain the profits they made from local operations. Reinvested earnings settled at $80 million, about a fifth lower than last year.

Bets on debt instruments, which are deemed safer investments, also dropped by 28.8 percent to $229 million against $321 million placements in June 2019. However, the BSP noted that the declines are softer compared to previous months.

The June climb in investments was not enough to pull up the six-month tally to positive territory. Cumulative investments totaled $2.997 billion, down by 18.3 percent from the $3.67 billion infused in the country during the same period last year.

This year's foreign direct investment (FDI) tally is at $2.99 billion, down by 18.3% from the same period in 2019.

The BSP expects to rake in just $4.1 billion in FDI this year, compared to $7.6 billion infused by investors a year ago.

The pickup in investments could be sustained in the coming months as countries are moving away from total lockdowns, RCBC economist Michael Ricafort said, adding that low interest rates could usher in more demand.

The passage of the Corporate Recovery and Tax Incentives for Enterprises or CREATE bill – which will trim the tax rates for businesses – and "greater clarity" regarding incentives will help attract more investments in the long run, he added.