BSP chief bullish on FDI surge

The Philippines registered a 21.4 percent year-on-year rise in foreign direct investments (FDIs) in 2017 and Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla Jr. is hoping for this to increase further.

“That’s the whole proposition of government to attract more foreign direct investments because that’s actually a sustainable pillar for the balance of payments (BOP),” he told journalists Monday.

BOP is a statement of a country’s total transactions with the rest of the world in a particular period.

The country posted a  BOP deficit of USD531 million in January this year, up from USD9 million in the same month last year, as the central bank strengthened its foreign exchange operations and the national government paid its maturing foreign debt.

On Monday, the central bank reported that FDIs posted a record-high of USD10 billion last year as investors took note of the sustained improvement of macroeconomic fundamentals  and growth prospects.
Espenilla said economic managers have been putting in place policy reforms to enhance domestic investment environment such as on ease of doing business and policies on infrastructure.
“That’s really the main objective because as you know, as part of the development process, we need to invest more,” he pointed out.
The central bank chief said that “if you invest more savings, domestic savings, (and) it’s still not there it will result to current account deficit,” which he said, “is not necessarily a bad thing.”
“The way to move forward is to get financing for the continuing investment,” Espenilla said, adding that equity investment inflows is more preferable than external debt to finance all these projects.
The country has been posting deficits in its current account as the country imports more materials to address rising domestic needs.
However, the CA deficit remains healthy, monetary officials said, noting that this remains below one percent of gross domestic product (GDP) and that the country’s dollar reserves, which amounts to USD81.2 billion as of January 2018, remains adequate to finance 8.2 months’ worth of imports of goods and payments of services and primary income.

BSP officials said international standards for a healthy gross international reserves (GIR) or foreign exchange reserves is around three months’ worth of an economy’s requirements.