BSP sees more inflows of foreign investment

Dennis Lapid, in charge of the BSP’s Monetary Policy Sub-sector, expects net foreign direct investment inflows to increase to US$11 billion this year from US$12 billion next year.STAR/ File

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) sees more foreign direct investment (FDI) and speculative funds coming into the Philippines in the next two years due to the structural reforms implemented by the government.

Dennis Lapid, in charge of the BSP’s Monetary Policy Sub-sector, expects net foreign direct investment inflows to increase to US$11 billion this year from US$12 billion next year.

The Philippines booked a 23.2 percent plunge in net FDI inflows to $9.2 billion last year after reaching a record high of $11.98 billion in 2021 due to the prolonged global slowdown and high inflation that adversely affected investors’ decisions.

Likewise, Lapid added that foreign portfolio investment, or hot money, is expected to post a higher net inflow of $2.5 billion in 2023 and $3.5 billion in 2024 after returning to a net inflow of $1 billion last year from a net outflow of $2.4 billion in 2021.

For 2023, Lapid said the external sector is seen to register modest improvements compared to the December 2022 forecast round.

“This is mainly driven by better than previously expected actuals for key BOP (balance of payments) accounts. These include recent data on FDIs, business process outsourcing and tourism and travel related accounts,” Lapid added.


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The BSP sees BPO earnings growth steady at nine percent in 2023 and 2024 after slowing to 9.1 percent last year from 9.5 percent in 2021.

Tourism receipts, on the other hand, are seen growing at a slower pace of 80 percent this year and 50 percent next year after rising 595.4 percent last year with the lifting of strict COVID-19 quarantine and lockdown protocols.

Lapid said the central bank sees growth in merchandise exports slowing to three percent this year before rising to six percent next year from 5.9 percent last year, while growth in merchandise imports is expected to slow to four percent this year and eight percent next year from 18.5 percent last year.

The increase in service exports is seen to slow to 17 percent this year and 16 percent next year from 22.3 percent last year. Service imports are also seen to fall to 11 percent from 30.2 percent.

This would translate to a lower BOP deficit of $1.6 billion this year and $500 million next year and a smaller current account deficit of $17.1 billion and $16.8 billion from a record high of $17.8 billion .

“For 2024, the overall BOP position is expected to remain in deficit territory with a smaller deficit than in the previous forecast, consistent with the normalization of global and domestic economic activity,” Lapid said.

According to Lapid, the multilateral lender International Monetary Fund (IMF) sees global trade growth slowing to 2.4 percent this year and 3.4 percent next year.

He said the sustained build-up of international reserves is expected to reinforce positive investor sentiment and bring in investment flows despite the current challenging global environment.

The BSP sees gross international reserves (GIR) returning to the $100 billion level this year and $102 billion next year after falling to $96.1 billion last year.

Rizal Commercial Banking Corp. Chief Economist Michael Ricafort, for his part, said FDIs remain one of the bright spots and one of the main pillars of the economic recovery from COVID-19 for the Philippine economy.

Ricafort said that the adoption of reform measures, especially Republic Act 11534 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, which reduced the corporate tax by at least five percentage points from 30 percent retroactively in July 2020 and provides greater certainty for investments would also continue to help attract more foreign direct investment to be more determined and locate in the country.

He said the country’s membership of the Regional Comprehensive Economic Partnership (RCEP), the world’s largest free trade agreement led by China, would help attract more foreign direct investment to locate in the country as a manufacturing and marketing base.

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