Economist sees higher net FDIs

June 12, 2019
Bangko Sentral ng Pilipinas

A respected economist has projected an improvement in the Philippines’ net foreign direct investment due to a confluence of factors, including advancements in the country’s investment grade, decline in interest rates, and possible trade deal between the US and China.

The Bangko Sentral on Monday reported a 13.9-percent year-on-year decline in net FDIs last March to USD586 million due to a drop in equity capital investments to USD126 million from the previous year’s USD351 million.

In a report, Rizal Commercial Banking Corp. Economics and Industry Research head Michael Ricafort said the drop in last March’s FDIs “may be attributed to the slower global economic growth/outlook largely due to the lingering US-China trade war since July 2018.”

Other factors may include the uncertainties in the planned rationalization of fiscal incentives, as well as the wait-and-see stance, pending developments in inflation and interest rates.

Ricafort said FDI inflows into the Philippines have improved in recent years but the country still needs to catch up, vis-à-vis other Asian countries.

He said the government’s infrastructure program will be a plus to attract more foreign investments in the country.

Ricafort thus projected increased FDIs in the coming months with the help of the upgrade in the country’s credit rating, deceleration of inflation rate, and further rise in the government’s infrastructure program.

He said further cuts in interest rates will also encourage more investors to borrow to have more funds.

Ricafort also said that whether a US-China trade deal materializes, the Philippines stands to benefit from the situation either way.