Net FDI inflow plunged to 10-year low in April

MANILA, Philippine – The net foreign direct investment (FDI) inflow into the Philippines plunged to its lowest level in nearly a decade in April, as heightened global uncertainty at the peak of the Middle East war weighed on investor sentiment.

According to the Bangko Sentral ng Pilipinas (BSP), inflows exceeded outflows by $250 million during the month, the weakest net inflow since June 2016, when the country recorded $244 million.

READ: FDI inflows hit 2-month low

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The April figure was also a hefty 58.8 percent lower than a year earlier, marking the steepest annual decline since the 76.1-percent drop recorded in December 2022 when the pandemic depressed investments.

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For the first four months of the year, net FDI inflow totaled nearly $2 billion, down 26.5 percent from a year ago.

Ruben Carlo Asuncion, chief economist at UnionBank of the Philippines, said the weak outturn reflected a more cautious stance among foreign investors amid lingering global uncertainties.

“The sharp decline likely stemmed from softer intercompany lending, weaker reinvestment activity and possibly the postponement of fresh equity investments,” Asuncion said.

“The timing is not entirely surprising, considering that the global investment environment remains challenged by trade-related uncertainties, geopolitical tensions and heightened market volatility, all of which tend to delay long-term investment decisions,” he added.

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As it is, April marked the peak of the Middle East war, which fueled volatility in global financial markets, drove up oil prices and heightened concerns over both the world and the Philippines’ economic outlook.

READ: How Iran uses the Strait of Hormuz to pressure the US

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Broken down, equity capital placements—a measure of new FDIs—rose 21 percent year on year to $136 million. At the same time, equity capital withdrawals plunged 91.6 percent to just $9 million.

As a result, net equity capital inflows ballooned 3,075 percent to $127 million.

Meanwhile, reinvestment of earnings slipped 1 percent to $80 million.

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But despite the weak April FDI, Asuncion said the latest data do not indicate that the Philippines is becoming a less attractive destination for foreign investments since the country is still supported by a large consumer base, improving infrastructure, ongoing reforms and favorable demographics. INQ