Foreign direct investment (FDI) net inflows continued its upward momentum for the third consecutive month in March 2024, registering a 23.1 percent year-on-year growth to reach US$686 million from the US$557 million net inflows in March 2023 (Figure 1).[1, 2]
The expansion in FDI net inflows was driven mainly by nonresidents’ net investments in debt instruments, which grew by 19.0 percent year-on-year to US$465 million from US$391 million in March 2023.[3]
Further, nonresidents’ net investments in equity capital (other than reinvestment of earnings) rose by 67.1 percent to US$157 million from US$94 million.
Meanwhile, their reinvestment of earnings declined by 11.3 percent to US$64 million in March 2024 from US$72 million in March 2023.
Equity capital placements during the reference month were sourced primarily from Japan, Singapore, and the United States. These were invested largely in the 1) manufacturing, 2) financial and insurance, and 3) real estate industries.
Said developments brought the cumulative FDI net inflows to US$3.0 billion in Q1 2024, a 42.1 percent growth from the US$2.1 billion net inflows recorded in Q1 2023 (Figure 2). FDI increased during the quarter on the back of the country’s strong growth prospects and moderating inflation.
[1] The BSP statistics on FDI are compiled based on the Balance of Payments and International Investment Position Manual, 6th Edition (BPM6). FDI includes (a) investment by a nonresident direct investor in a resident enterprise, whose equity capital in the latter is at least 10 percent, and (b) investment made by a nonresident subsidiary/associate in its resident direct investor. FDI can be in the form of equity capital, reinvestment of earnings, and borrowings.
[2] The BSP FDI statistics are distinct from the investment data of other government sources. BSP FDI covers actual investment inflows. By contrast, the approved foreign investments data that are published by the Philippine Statistics Authority (PSA), which are sourced from Investment Promotion Agencies (IPAs), represent investment commitments, which may not necessarily be realized fully, in a given period. Further, the said PSA data are not based on the 10 percent ownership criterion under BPM6. Moreover, the BSP’s FDI data are presented in net terms (i.e., equity capital placements less withdrawals), while the PSA’s foreign investment data do not account for equity withdrawals.
[3] Net investments in debt instruments consist mainly of intercompany borrowing/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines. The remaining portion of net investments in debt instruments are investments made by nonresident subsidiaries/associates in their resident direct investors, i.e., reverse investment.
