Central bank says 2009 FDI to stay ‘steady’

BusinesssWorld

Posted at Feb 05 2009 01:57 AM | Updated as of Feb 05 2009 09:57 AM

The global economic downturn will not lead to a reversal in long-term foreign investments to the Philippines, the Bangko Sentral ng Pilipinas (BSP) said.

"FDI (foreign direct investments) will still be positive," central bank deputy governor Diwa C. Guinigundo told reporters late on Tuesday.

FDI, which accounts for foreign capital going into affiliate local enterprises, is seen as more stable indicator of investor interest. It compares to portfolio investments or "hot money" that is placed in securities which can be easily moved out of a country.

At worst, said Mr. Guinigundo, FDI will be "steady" this year with the mining, shipping and business process outsourcing sectors offsetting divestments in the exports sector.

Latest data available show a net FDI inflow of just $31 million in October last year, down from September’s $311 million. This brought the 10-month tally to $1.42 billion, nearly 50% lower compared to net inflows of $2.65 billion in the same period in 2007.

University of the Philippines Economist Benjamin E. Diokno said flat growth was nothing to celebrate about.

"Zero growth reflects the bleak prospect of the Philippine economy," he said in a text message. "But even that may be optimistic".

He said investors were being "extremely cautious, and may choose to wait for the outcome of the 2010 national elections."

But Luz L. Lorenzo, an economist from ATR Kim Eng Securities, agreed with the central bank assessment.

"Asia is still one of, if not the fastest growing regions in the world" despite the crisis, she said. — P. L. G. Montecillo