Trump effect sank FDI net inflows to 11-yr low in Dec
The net inflow of job-generating foreign direct investments (FDIs) fell to its lowest level in over a decade in December as uncertainties from a second Donald Trump presidency frayed investor nerves, putting the entire 2024 haul below the central bank’s forecast.
Latest data from the Bangko Sentral ng Pilipinas (BSP) showed $110 million more FDIs entered the country against those that left during the final month of 2024, plummeting by 85 percent year-on-year.
This was the weakest FDI net inflow since the $102 million recorded in December 2013, back when the world was still picking up the pieces from the Wall Street-epicentered global financial crisis.
That, in turn, failed to give the full-year tally a last-minute boost.
Data showed the total FDI net inflow in 2024 had amounted to $8.9 billion, almost unchanged from the 2023 level and falling short of the BSP’s forecast of a $9-billion net inflow for last year.
Unlike the so-called “hot money” that leaves markets at the first sign of trouble, FDIs are firmer capital inflows that create jobs for people. That said, the government wants existing FDIs to stay while attracting new ones.
Sluggish growth
Rischelle Alysha Legaspi, economist at Oikonomia Advisory and Research Inc., said investor sentiment might have turned sour following the “sluggish” domestic economic growth last year and the re-election of Trump, whose protectionist trade and immigration policies are sending shockwaves across the globe.
“The FDI inflow’s slightly stagnated growth may be attributed to the gradual rise in inflation since September 2024 alongside sluggish economic growth. This led to lowered investor confidence,” Legaspi said.
“Furthermore, the uncertainties of the Trump presidency could have influenced investors to be more conservative,” she added.
Dissecting the BSP’s report, equity capital placements, a measure of new FDIs, collapsed by 19.4 percent to $185 million in December.
Most of the fresh foreign capital came from Singapore, Japan, the United States and South Korea. The bulk of these inflows were invested in companies engaged in information and communication; manufacturing; financial and insurance; construction; and real estate.
But at the same time, FDIs worth $136 million left the country in December, although the amount of outflows was 31.5 percent smaller compared with the previous year.
All of that yielded a net equity capital placement of $49 million, up by 58 percent.
While reinvestment of earnings dropped by 14.7 percent to $80 million, they still took the lion’s share of the total FDIs in the last month of 2024.
Lastly, intercompany borrowings between multinational companies and their Philippine units shifted to a net outflow of $19 million in December, a reversal from the $618- million net inflow a year ago.
For Oikonomia’s Legaspi, the country’s revamped tax incentive system – as provided by the new law popularly known as the CREATE MORE Act – could help perk up investor sentiment. Additional interest rate cuts could also increase the appeal of the Philippines to job-generating foreign capital, she added.
For this year, the BSP is penciling in a $10-billion FDI net inflow.
“2025 should be a more favorable year for FDI inflows because of CREATE MORE, which provides incentives such as tax holidays, etc. Additionally, a rate cut in the next BSP meeting could be beneficial in making the Philippines a more attractive investment hub,” Legaspi explained.
