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More long-term capital enters the Philippines in August from loans by overseas firms

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More long-term capital entered the Philippines in August driven mainly by loans by overseas firms to their local units, and pushing the eight-month tally of foreign direct investments (FDI) further into positive territory, the central bank said on Wednesday (Nov. 10).

In a statement, the Bangko Sentral ng Pilipinas (BSP) said FDI net inflows in August 2021 expanded by 19.8 percent year-on-year to reach $812 million from $677 million in the same period in 2020.

This development brought the FDI net inflows for the first eight months of 2021 to $6.4 billion, higher by 39.7 percent than the $4.6 billion net inflows in the comparable period in 2020.

The cumulative FDI net inflows rose on the back of the 71.6 percent growth in non-residents’ net investments in debt instruments to $4.5 billion from $2.6 billion.

Likewise, reinvestment of earnings rose by 11.0 percent to $776 million from the $699 million registered last year.

However, non-residents’ net investments in equity capital, other than reinvestment of earnings, declined by 12.2 percent to $1.1 billion, from $1.2 billion in 2020.

Net investments in equity capital fell as placements dropped by 8.2 percent to $1.4 billion from $1.5 billion and withdrawals increased by 12.1 percent to $272 million from $243 million.

Equity capital placements came primarily from Singapore, Japan and the United States. These were channeled mainly to the manufacturing; financial and insurance; electricity, gas, steam, and air-conditioning; and real estate industries.

For August 2021, the expansion in FDI net inflows was driven by non-residents’ net investments in debt instruments, which grew by 38 percent year-on-year to $636 million from $461 million in August 2020.

Reinvestment of earnings contracted by 24.7 percent to $99 million from $132 million. Likewise, non-residents’ net investments in equity capital declined by 9.7 percent to $77 million from $85 million in August 2020.

This was due to the rise in equity capital withdrawals (by 51.2 percent to $50 million from $33 million, which more than offset the increase in equity capital placements by 7.3 percent to $126 million from $118 million.

Equity capital placements originated mostly from Japan, the Netherlands, and the United States. These were directed largely to the manufacturing; information and communication; and real estate industries.

Source: https://business.inquirer.net/334164/fdi-up-in-august-as-firms-get-loans-from-parent-companies

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