NextGen Day

Despite the fall in FDIs in July, one economist is still hopeful about the Philippines, pointing to benefits from fiscal reform initiatives and the Marcos administration’s economic policies.

The Bangko Sentral ng Pilipinas (BSP) stated on Monday that net FDI fell by 64.4% year over year in July 2022 to USD 460 million.

Michael Ricafort, chief economist of Rizal Commercial Banking Corporation (RCBC), attributed a portion of the loss to market turbulence during that time due to the rise of the US inflation rate to a 40-year high last June at 9.1 percent.

The Federal Reserve maintained its rate-tightening actions to control the rising consumer price index (CPI), which damaged investors’ sentiment and lowered investments, he added, even if the US inflation rate slowed to 8.5 percent in July.

He continued that the current confrontation between Russia and Ukraine, a potential US recession, and rising global commodity prices all exacerbate these problems.

The new administration’s announcement that pandemic-related lockdowns will no longer be used, and the government receiving investment promises from the President’s visits to Indonesia, Singapore, and the US, lead Ricafort to predict that FDIs “may yet pick up in the following months.”

As the government continues to reopen the economy, he claimed that investments have also grown more definite where they decide to put their money, partly because of increased coronavirus disease vaccination in 2019. (Covid-19).

He continued, “The missing pieces of the recovery story — tourism (foreign and local) and face-to-face/in-person schooling (100 percent target by November 2022) have already resumed and are on the right track to bring along related/allied businesses/industries towards a greater recovery path and could help attract more foreign investments/FDIs, going forward.

The Corporation Recovery and Tax Incentives for Enterprises (CREATE) Law, the Public Services Act, and the Retail Trade Liberalization Act are a few of the reform initiatives Ricafort mentioned that are anticipated to aid FDIs.

“Possible membership of the country in the Regional Comprehensive Economic Partnership (RCEP), the largest free trade agreement in the world and one that China leads, would help attract more foreign direct investments to locate in the country as a production and/or marketing base, as well as an access point to larger export markets of the other RCEP member countries in the region and other parts of the world,” he said.

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