DOF Economic Bulletin on Foreign Direct Investment, March 2022

·        Foreign direct investment (FDI) in the first quarter of 2022 rose from US$2.39 billion to US$2.44 billion, up 2.0% from the same period in 2022.  A 33.5% growth in net debt instruments offset the 44.2% contraction in equity investments. (Table 1)  

·        Net foreign direct investment (FDI) inflows in March 2022 totaled US$727 million, 9.8% lower than the US$806 million reached in March last year.   

·        Net equity capital investments for the first quarter of the year were primarily in the manufacturing, financial and insurance, real estate, and information and communication sectors.  

DOF View

Sustained inflows of foreign investments bring in more dynamism to the economy and provide competition to local players not only in terms of product or service quality, but also in terms of attracting workers. Structural reforms such as the recently passed amendments to the Retail Trade Liberalization Act (RTLA), to the Foreign Investment Act (FIA), and to the Public Service Act (PSA), will help improve the country’s investment climate, encourage more investments into the country, and support investment-led growth. 

Amid external economic headwinds, the next administration should continue and build on the reform momentum to encourage both investment- and export-led growth. 

The rise in infrastructure spending above 5% of GDP is also expected to enhance growth in private investment. Data for two decades show that for every percentage point of GDP that  public construction rises, private investment rises by 1.34 percentage points of GDP with a three-year lag and 2.03 percentage points of GDP with 4 to 6 years’ lag.  (DOF Economic Bulletin on Public and Private Investment, 24 May 2019).   

·        The lingering threat of the COVID-19 virus indicate possible surges in the future. The ongoing rise in global inflation that followed the war in Ukraine may result in a global rise in interest rates that can both disrupt economic activity and potentially derail economic recovery. Sustaining the vaccination program and prudently re-opening the economy while maintaining good macroeconomic fundamentals will go a long way to protect economic recovery.

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