FDI hits all-time high $10.5B in 2021

 FDI hits all-time high $10.5B in 2021

By Luz Wendy T. Noble, Reporter

NET INFLOWS of foreign direct investments (FDIs) reached an all-time high of $10.518 billion in 2021, reflecting the improvement in investor sentiment as the global economy rebounded from the lows of 2020.

Data released by the Bangko Sentral ng Pilipinas (BSP) showed FDI inflows in 2021 were 54.2% higher than the $6.822 billion seen in 2020 and surpassed the previous high of $10.3 billion in 2017.

It also exceeded the central bank’s $8-billion projection for the year, and the $8.671-billion inflows in 2019 before the pandemic.

In December alone, FDI net inflows surged by 59% to $1.1 billion.

“The growth in FDI reflected continued positive foreign investor sentiment on the country amid expectations of a rebound in domestic economic activity and declining COVID-19 (coronavirus disease 2019) reported cases, as well as the strengthening of the global economy,” the BSP said in a statement.

Metro Manila and other parts of the country were under a more relaxed Alert Level 2 from November to December, allowing more businesses to operate at increased capacity during the holiday season.

Investors were more bullish on the Philippines after the passage of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

CREATE, which immediately slashed corporate income tax to 25%, was signed into law in March 2021.

By components, investments in debt instruments surged by 60% to $634 million in December from $396 million in the same month of 2020.

Inflows to equity and investment fund shares rose by 57.4% to $432 million in December from $274 million in the same month a year prior.

FDIs in equity capital increased by 59.5% year on year to $336 million in December, fueled by the 61% growth in placements to $371 million. Withdrawals also jumped by 76.3% to $35 million.

In December, equity capital placements mostly came from Singapore, Japan, the United States, and the Netherlands. These went mainly to manufacturing, electricity, gas, steam, and air-conditioning; financial and insurance; and real estate industries.

Meanwhile, reinvestment of earnings expanded by 50.3% to $96 million in December from $64 million.

For this year, Mr. Ricafort said foreign investors will consider the trade policy of the incoming president. Measures that will make the economy more business-friendly and improve anti-corruption and sustainability standards could encourage more foreigners to invest in the Philippines, he said.

“Possible membership of the country into the Regional Comprehensive Economic Partnership (RCEP), which is the world’s biggest free trade agreement, would also help attract more FDIs to locate in the country,” he added.

On the other hand, Mr. Ricafort said the ongoing war between Ukraine and Russia is creating more uncertainty among foreign investors. Any possible emergence of new virus variants would also cause risk-off sentiment, he added.

The BSP expects FDI net inflows to reach $8.5 billion this year.