FDI inflow continues to decelerate in 2023
In 2023, the Philippines experienced a second consecutive decline in the net inflow of foreign direct investments (FDI), reflecting global economic uncertainties and geopolitical tensions, according to the Bangko Sentral ng Pilipinas (BSP). The FDI net inflow dropped by 6.6 percent to $8.86 billion compared to $9.49 billion the previous year, although it slightly surpassed the BSP’s $8-billion target. Despite the nation’s solid macroeconomic fundamentals, concerns over subdued global economic growth and geopolitical risks persisted, affecting investor confidence.
The Philippine economy expanded by 5.6 percent in 2023, a decline from 7.6 percent in 2022 and below the government’s target range of six to seven percent. Nevertheless, the country remained among the fastest-growing economies in the region. The Development Budget Coordination Committee anticipates a rebound in economic growth to between 6.5 and 7.5 percent for the current year.
December saw a 29.9 percent increase in FDI net inflows to $826 million, yet it marked the lowest figure in three months. Various factors including a sluggish global economy, escalating interest rates in developed nations, geopolitical tensions, and domestic issues like inflation contributed to a cautious investment climate, as noted by Security Bank’s chief economist Robert Dan Roces.
Reinvestment of earnings declined by 3.6 percent, equity and investment fund shares dropped by 22 percent, and net equity other than reinvestment of earnings decreased by 34 percent compared to the previous year. Total equity placements fell by 16.7 percent, while withdrawals more than doubled.
FDI inflows from Japan, the United States, Singapore, and Germany were primarily directed towards key sectors such as manufacturing, real estate, and financial services. Investments in debt instruments, largely intercompany borrowing, increased slightly by 1.6 percent.
Roces highlighted the uncertain outlook for FDI inflows in the current year due to ongoing global challenges. Nevertheless, he mentioned government initiatives to enhance the business environment, focus on promising sectors, and a broader push for FDI as potential mitigating factors.
The BSP’s decision to raise key policy rates to a near 17-year high of 6.5 percent from May 2022 to October 2023 aimed to control inflation and stabilize the peso. For the current year, the BSP projects an increase in the net inflow of direct investments to $10 billion.
Business News: FDI inflow continues to decelerate in 2023
