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March 11, 2009

Philippines: Foreign investment drops by almost 50% in 2008

Net foreign direct investment in the Philippines nearly halved in 2008 as companies postponed new spending in the face of the global economic downturn, central bank data showed on Tuesday.

Net FDI inflows fell 48 percent to $1.5 billion last year, Reuters quoted the central bank as saying in a statement.

Foreign direct investment, along with remittances from around nine million Filipinos working overseas, is an important source of foreign exchange for the Philippines, helping keep the country's balance of payments in surplus.

Foreign equity capital registered a net inflow of $1.35 billion in 2008, down 31 percent from a year earlier.

Other capital account inflows -- mainly loans of foreign companies to their local units -- fell 25 percent to $261 million.

The central bank has yet to release its FDI estimates for 2009, but it has predicted investment flows into the Southeast nation would stay in the black along with remittances, lifting the BOP surplus to $700 million by year end.

Overall balance of payments surplus in 2008 tumbled to a four-year low of $89 million from a record $8.58 billion in 2007.

The country's policymakers have taken a series of steps, including interest rate cuts totalling 125 basis points in four months, to shore up growth and minimise the impact of the deepening global financial crisis on the Philippine economy.

The government expects the economy to grow at least 3.7 percent this year after last year's 4.6 percent expansion, but the International Monetary Fund projects 2009 growth of just 2.25 percent.



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