FDI net inflows grow by 6.3 percent in October 2022

Foreign direct investment (FDI) net inflows grew by 6.3 percent to US$923 million in October 2022 from the US$868 million net inflows in October 2021.^1, 2

Despite the global economic headwinds, FDI net inflows rose on account of the increase in non-residents’ net investments in debt instruments and equity capital of their local affiliates (Figure 1).³

By country source, equity capital placements emanated largely from Japan, the United States, and Singapore. Said investments were channeled mainly to the 1) financial and insurance; 2) manufacturing; and 3) real estate sectors.

On a cumulative basis, however, FDI net inflows dipped by 8.3 percent to US$7.6 billion from the US$8.3 billion net inflows recorded in January-October 2021, as all components of FDI posted declines (Figure 2).

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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.