FDI posts US$460M net inflows in July 2022

Foreign direct investment (FDI) posted US$460 million net inflows in July 2022, bringing the cumulative net inflows to US$5.1 billion for the first seven months of 2022.1,2

These levels, however, were lower than the comparable net inflows posted a year-ago (US$1.3 billion and US$5.8 billion, respectively).

All major FDI components yielded lower net inflows in January-July 2022 as foreign investors remained cautious amid continued adverse global conditions (Figure 1).

In July 2022, FDI net inflows decreased due largely to the lower non-residents’ net investments in debt instruments of their local affiliates.3 This decrease more than offset the growth in their net investments in equity capital (Figure 2).

Equity capital infusions during the month originated mainly from Singapore, Japan, and the United States. These were invested largely in the 1) construction; 2) manufacturing; and 3) real estate industries.

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 non-resident direct investor in a resident enterprise, whose equity capital in the latter is at least 10 percent, and (b) investment made by a non-resident 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 non-resident subsidiaries/associates in their resident direct investors, i.e., reverse investment.