Central bank cuts '08 FDI, portfolio flows estimates


Posted at Jun 27 2008 12:30 PM | Updated as of Jun 27 2008 08:30 PM


MANILA - The central bank slashed its estimates for 2008 net foreign direct investments (FDI) and net foreign portfolio inflows on Thursday, citing risk aversion and the bleaker economic outlook.

The central bank expects net FDI this year to reach just $2.6 billion from a previous estimate of $4.2 billion and broadly in line with last year's $2.7 billion.

For net foreign portfolio inflows, the monetary authority expects just $1.1 billion this year, down from a previous forecast of $3.2 billion. In 2007, the Philippines attracted $3.5 billion as overseas investors took a renewed interest in the Southeast Asian economy.

The new estimate for net portfolio inflows this year assumes the government will raise at least $500 million in another sovereign bond issue to help fund a budget deficit of as much as 75 billion pesos ($1.7 billion), Iluminada Sicat, director at the central bank's economic research department, told reporters.

The government has abandoned a plan to balance its budget this year in favour of more spending to boost a sagging domestic economy.

As of the first quarter, net FDIs reached $551 million, down around 60 percent from the same 2007 period.

The central bank earlier said it was hopeful that investments in mining, shipbuilding and construction sectors would take off this year despite jitters in the global economy.

Foreign portfolio investments had a net outflow of $271.8 million in the first five months of the year, a reversal of a net inflow of $1.7 billion in the same period of 2007, according to latest central bank data.

The central bank said earlier this month it had cut its forecast for the country's balance of payments surplus this year to $2.5 billion, lower than an original projection of $3.4 billion for 2008 and last year's actual surfeit of $8.6 billion.

The country is also set to see its trade deficit expand by a third to some $11 billion, the highest in at least 9 years due to soaring rice and fuel import costs and weaker demand for electronics exports, central bank documents on Wednesday showed.