Long-term capital flows into the Philippines surged by more than a fifth in March 2024, marking the third consecutive month of growth this year. The increase was driven primarily by foreign companies’ investments in debt instruments, according to data released by the Bangko Sentral ng Pilipinas (BSP).
The BSP reported that net foreign direct investments (FDI) grew by 23.1%, reaching US$686 million in March 2024, up from US$557 million in the same month last year. This growth brought the cumulative FDI net inflows for the first quarter of 2024 to US$3 billion, a significant 42% increase from the US$2.1 billion recorded during the same period in 2023.
The BSP attributed the rise in FDI to the country’s strong growth prospects and moderating inflation. Rizal Commercial Banking Corp chief economist Michael Ricafort noted the improved economic and financial market performance in recent months as a contributing factor.
“Philippine economic growth is among the fastest in ASEAN and Asia. Long-term US and local interest rates have eased from their immediate highs since November 2023, encouraging more FDIs to come in,” Ricafort said. He also highlighted the favorable demographics and lower long-term interest rates and borrowing costs that have helped boost global investments.
In March 2024, non-residents’ net investments in debt instruments increased by 19% year-on-year, rising to US$465 million from US$391 million in March 2023. Net investment in equity capital, excluding reinvestment of earnings, soared by 67.1%, reaching US$157 million from US$94 million. However, the reinvestment of earnings from foreign firms saw an 11.3% decline, falling to US$64 million from US$72 million.
The BSP noted that a significant portion of equity capital placements in March came from Japan, accounting for 64% of the total. Singapore and the United States contributed 16% and 10%, respectively. For the first quarter, the majority of investments came from the Netherlands and Japan, which accounted for 68% and 21% of the total, respectively.
Investment destinations were largely focused on the manufacturing, financial and insurance, and real estate sectors. A monthly breakdown revealed that 66% of investments went to manufacturing, 14% to financial and insurance, and 11% to real estate. The first quarter review showed that 71% of investments were directed towards the financial and insurance sectors, with manufacturing and real estate receiving 16% and 5%, respectively.
These trends highlight the Philippines’ growing attractiveness as an investment destination, bolstered by strong economic fundamentals and strategic investments in key sectors. As the country continues to implement policies that support economic stability and growth, it is likely to see sustained increases in foreign direct investment.
