FDI registers US$797 million net inflows in August 2022

Foreign direct investment (FDI) registered US$797 million net inflows in August 2022, a decline of 19.2 percent from the US$987 million net inflows in same month last year.^1, 2

On a cumulative basis, FDI net inflows for January-August 2022 amounted to US$5.9 billion, 13.0 percent lower than the US$6.8 billion recorded in the comparable period in 2021.

The slowdown in FDI may be attributed to concerns over weakening global growth prospects, particularly with the moderating demand and policy tightening in major economies (Figure 1).

In August 2022, FDI net inflows decreased as all major FDI components posted lower net inflows, particularly non-residents’ net investments in debt instruments of their local affiliates (Figure 2).^[3]

Equity capital placements during the month came mostly from Japan and the United States. Said investments were channeled largely to the 1) manufacturing; 2) real estate; and 3) information and communication industries.

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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.