FDI posts US$634-M net inflows in December 2022

Foreign direct investment (FDI) net inflows amounted to US$634 million in December 2022, lower by 76.2 percent than the US$2.7 billion net inflows in December 2021.^1, 2

The decline in FDI during the reference month was due largely to base effect, particularly given the significantly larger net placements of equity capital in December 2021 (Figure 1).^[1]

Non-residents’ net investments in debt instruments likewise declined in December 2022 while reinvestment of earnings remained broadly stable.

Bulk of the equity capital placements as sourced from Singapore, Germany, and Japan were channeled mostly to the manufacturing and real estate industries during the reference month.

Full-year FDI net inflows reached US$9.2 billion in 2022, a contraction of 23.2 percent from the US$12.0 billion net inflows recorded in 2021 (Figure 2).

By component, non-residents’ net investments in debt instruments and equity capital dropped while reinvestment of earnings slightly increased.

Notwithstanding the country’s sustained growth momentum, FDI net inflows decreased in 2022 due to the extended global slowdown and high inflation, which adversely affected investor decisions.

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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.

^[1] 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.