Net inflows of foreign direct investments have decreased for seven straight months in September 2019. FDI inflows are crucial and this trend is alarming.
The alarming trend can be attributed to investors deciding to hold off their plans to invest in various emerging markets.
Unfortunately, this includes the Philippines.
The Bangko Sentral ng Pilipinas said that the foreign direct investments’ inflows might continue to weaken if the global growth outlook fails to recover.
FDI inflows in September
Based on the latest data from the BSP, net FDI inflows already reached a low $566 million in September 2019.
Compared to the year-on-year figure in 2018, this was 2.9 percent lower.
The net FDI inflows for the January to September 2019 also amounted to only $5.12 billion.
The figure is a marked 37 percent decline compared to the same period in 2018, which totaled $8.11 billion.
Month-on-month net FDI inflow has been on a declining trend since March 2019.
This decline is somewhat out of character.
The BSP explained that the inflows continued to decline even though there was an increase of 79.5 percent in equity placements to $125 million in September 2019.
Withdrawals also fell by 84.8 percent to $28 million in comparison to the same month last year.
To aggravate the decline is the decrease in the reinvestment of earnings.
According to BSP, reinvestment decreased by 9.4 percent to just $74 million in September 2019, compared to the same period covered in 2018.
Slowdown Cannot Be Helped
The central bank released a statement claiming that the slowdown reflects the harmful effects of the already quite-extended trade disputes in the international arena.
The bleak picture is likely to continue if the global growth outlook does not improve.
BSP Governor Benjamin Diokno added that foreign investors prefer to have a wait-and-see attitude these days, pending the passage of the second package of the comprehensive tax reform program.
Diokno expects the program’s approval before 2019 ends or early 2020.
This might cause investors to decide whether to enter or exit finally.
The last thing inventors want, after all, is uncertainty.
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