The inflow of foreign direct investments (FDI) for the year to February climbed by 48.2 percent to $2.3 billion from $1.5 billion recorded in the same period last year.

The Bangko Sentral ng Pilipinas (BSP) said FDI in February contributed $1.4 billion which was 29.3 percent higher than the $1.1 billion seen in the same month last year.

“The growth in FDI reflects sustained investor confidence in the country’s macroeconomic fundamentals and resilience amid persistent inflationary pressures and global economic uncertainties,” BSP said.

Non-residents mostly invested in equities that exclude reinvestment of earnings in February, with 927.3 percent expansion to $764 million.

The Netherlands was the top source of investments, with 89 percent share in February and 80 percent in the first two months.

It was followed by Japan with 13 percent share as of February.

Offshore investors channeled most of their funds to the financial and insurance sector with 91 percent share in February, higher than the cumulative 82 percent in the first two months.

Other major sectors for FDI were manufacturing (8 percent) and real estate (4 percent) as of February.

Less debt papers

On the other hand, FDI in debt instruments in February decreased by 41.5 percent to $533 million from $912 million.

Reinvestment of earnings also shrank but at a smaller degree by 3.8 percent to $66 million from $69 million.

Bank of the Philippine Islands chief economist Jun Neri said investors will likely continue to direct funds mostly to the financial sector as the pandemic recovery enables a lively business environment.  

“Looking ahead, there is reason to expect a potential rebound in investment

spending for the rest of 2024. Loan growth data suggest that businesses may be starting to increase their capital expenditures as they adjust further to the current level of interest rates,” he said.

Despite the still elevated BSP policy rate of 6.5 percent, the central bank said lending by domestic banks accelerated by 8.6 percent in February from 7 percent in January.

Neri, however, said investors might remain hesitant with the real estate and construction sectors.

“These industries continue to grapple with several headwinds, such as weaker demand from the middle-income segment due to the pandemic and the high vacancy rates in office buildings amid the increasing adoption of work from home arrangements,” he said.

Jonathan Ravelas, former market strategist at BDO Unibank Inc., agreed consumers might exercise “discretionary spending” due to sticky inflation and high interest rates.

Nevertheless, Dan Roces, chief economist of Security Bank Corporation, said the Philippine economy will remain attractive to investors as the BSP maintains a healthy balance between interest rates and economic growth.

“External factors like rising global interest rates and potential capital flight could lead the BSP to maintain current rates to ensure competitiveness and manage inflation expectations,” he said.

“While inflation has risen for a few months, it remains within the target range,” Roces continued.

April inflation rose to 3.8 percent from 3.7 percent in March. The BSP aims to stabilize prices from 2 to 4 percent.