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China contribution to FDI minimal

Joshua Lao

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Photo credit: FB Page — Bangko Sentral ng Pilipinas @BangkoSentralngPilipinas

While the travel to mainland China has been lifted, its temporary imposition should not tell by any significant degree on the influx of foreign direct investments (FDI).

This was learned from Bangko Sentral ng Pilipinas (BSP) Department of Economic Research Director Dennis Lapid who noted that China’s contribution to overall FDI does not amount to much.

“The data that we have show that China only accounts for less than 1 percent of foreign direct investments. In the sense that there will be constraints in FDI, that will have a (small) effect on the economy,” Lapid said.

President Rodrigo Duterte imposed the travel ban amid concerns of the possible spread or contagion of the dreaded coronavirus disease 2019 (COVID-19) in the country.

Lapid said while the outbreak can be expected to deliver a blow to the economy, such will be temporary.

“I think the overall message is that this particular outbreak, while acknowledged to be high impact, is a short-lived event. Therefore, a recovery is expected once the outbreak is over,” Lapid explained.

According to him, government spending, which recovered in the last quarter of 2019 will provide ample legroom allowing both fiscal and monetary authorities to maneuver such in a way as to spur economic activities.

“We’ve seen the fourth-quarter data for GDP (gross domestic product) where domestic demand is still largely impacted in terms of private consumption and a rebound in capital spending. But on top of that, the space for policy response both in terms of monetary policy and in terms of liquidity provision and interest rate adjustment is available,” he said.

“At the same time, fiscal policy is also available to authorities, especially now that fiscal spending is back on strength. So, there will be (enough support for the economy),” he added.

Lapid’s boss, BSP Governor Diokno, said the passage of the Comprehensive Income Tax and Incentives Rationalization Act (CITIRA) should be done promptly and well if the lawmakers want the Philippines to obtain an A rating from the various ratings agencies like Standard and Poor’s or Fitch.

“It can’t be done in a second-rate manner. It’s got to be a structural reform. They got to be serious. If they want to have an A rating, which will benefit the whole country, its citizens and firms, they have to be serious,” Diokno told reporters.

Earlier, the BSP chief said that part of the reason why investors remain ambivalent are concerns over so-called policy uncertainty in the Philippines.

This has to do mostly with business rules and regulations and even interpretations in midstream when a good part of a foreign entity’s investments has taken root but suddenly exposed to a reversal of views of meaning.

Such reversals are unacceptable, the BSP said.

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