Investors still optimistic on Philippines growth prospects

MANILA, Philippines — The recovery of foreign direct investment (FDI) inflows demonstrates investors continued confidence in the Philippines’ long-term growth prospects, according to the Department of Finance (DOF) .

In his latest economic bulletin, Finance undersecretary Gil Beltran said that while FDIs initially suffered following the imposition of lockdowns in mid-March, inflows showed a quick recovery afterwards.

“Although strict quarantine measures implemented in the final weeks of the first quarter may have put FDI inflows temporarily on hold, the quick recovery of FDI in the subsequent months suggests that the Philippines’ long-term prospects remain positive in the eyes of investors,” Beltran said.

Citing data from the Bangko Sentral ng Pilipinas, Beltran said that the Philippines’ net FDI in April, or the first full month of Luzon-wide lockdown, plunged by 68.4 percent to $314 million from $993 million in the same month last year.

This was reversed in May and June, when year-on-year FDI growth reached 39.1 percent and 7.1 percent, respectively.

Beltran said the inflow of FDIs in July also grew by 35.1 percent to $797 million from $590 million in the same month in 2019.

However, the DOF’s chief economist said the inflow of FDIs in the first seven months was still down by 10.9 percent to $3.8 billion compared to $4.26 billion in the same period last year.

He said the decline in reinvestment of earnings and net debt instruments, which stood at 20.9 percent and 27.1 percent, respectively, offset the 111.1 percent growth in net equity capital investments for the period.

“Net equity capital investments for the period were primarily in the manufacturing, real estate, financial and insurance, and administrative and support service industries,” Beltran said.

To attract more investors into the country, Beltran said the government should continue doing investment-incentivizing activities, such as improving ease of doing businesses, and sustaining infrastructure investments.

He also called on the passage of pending bills, including the Corporate Recovery and Tax Incentives for Enterprises (CREATE), Financial Institutions’ Strategic Transfer (FIST) and Passive Income and Financial Intermediary Taxation Act (PIFITA).

“Reforms such as CREATE, FIST, and PIFITA, along with amendments to the Commonwealth-era Public Service Act and the Retail Trade Liberalization Act will also help encourage more foreign investments which, in turn, will expand consumer choices and the pool of employers,” he said.

Earlier, Beltran said a “prudent and calibrated” reopening of various sectors would be a key driver toward economic recovery.

He said the trade sector had seen improvements in the past months, reflecting the gradual reopening of the economy after Luzon was placed under enhanced community quarantine in mid-March.

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Article and Photo originally posted by PhilStar last October 19, 2020 12:00am and written by Mary Grace Padin.