Uncertainties tagged as net FDI nosedives

NET foreign direct investments (FDI) fell to their lowest in more than three years in September, data from the Bangko Sentral ng Pilipinas (BSP) showed on Monday.

All major FDI components contracted during the month and the net result of $422 million was 42.2 percent lower than the year-earlier $731 million. Net FDI was last lower in April 2020 when it hit $314 million.

Year-to-date, net FDI totaled $5.9 billion, also the lowest January-September tally since 2020's $5.12 billion and 15.9 percent down from $7.0 billion in the comparable 2022 period.

«FDI declined on the back of persistent global economic uncertainties, which continued to affect investor decisions,» the BSP said in a statement.

In September alone, nonresidents' net investments in debt instruments plunged by 47.8-percent to $238 million from $456 million.

Net investments in equity capital also plummeted, by 43.9 percent to $105 million from $187 million, and reinvestments of earnings dropped 9.9 percent to $79 million from $87 million.

Japan, the United States, and Singapore accounted for the bulk of September FDI, which was mostly channeled to the finance and insurance (35 percent), construction (29 percent), and manufacturing (22 percent) sectors.

From January to September, net equity capital placements declined by 18.5 percent to $945 million from $1.16 billion a year earlier.

Reinvestments of earnings recorded a downtick to $869 million, down 6.1 percent from $925 million, while net investments in debt instruments dipped by 17.2 percent to $4.06 billion from $4.91 billion.

Equity capital placements for the first nine months of 2023 originated mostly from Japan, Singapore, the United States, and Germany.

Half or 50 percent went to manufacturing, followed by real estate (14 percent), financial and insurance (12 percent), and others (24 percent).

Sought for comment, Rizal Commercial Banking Corp. chief economist Michael Ricafort said the decline in net FDI could be linked to elevated global and local interest rates.

These have led to increased borrowing costs, consequently dampening enthusiasm for fresh investments including FDI, he added.

«Risk of [a] US economic slowdown or even risk of recession after