Approved foreign investments surge in Q2

Approved foreign investment pledges surged in the second quarter, driven by improved investor confidence, preliminary data from the Philippine Statistics Authority (PSA) showed on Thursday.

Foreign investment commitments jumped by 220.7% year on year to PHP 189.5 billion in the April-to-June period, a turnaround from the revised 64% contraction in the first quarter.

It was the fastest year-on-year increase since the 4,445.6% surge seen in the first quarter of 2023.

The amount of foreign investment pledges in the second quarter was the biggest since the PHP 394.46 billion approved in the fourth quarter of 2023.

“The quarter-on-quarter expansion of the Philippine economy was apparently taken as indication of market growth, at least in the short and medium term, prompting an increase in investment pledges and approved investments,” University of Asia and the Pacific Senior Economist Cid L. Terosa said in an e-mail interview.

The Philippine economy grew by 6.3% year on year in the second quarter, faster than the revised 5.8% in the first quarter and 4.3% in the April-to-June period in 2023.

In the second quarter, Switzerland was the top source of foreign investment pledges with P172.04 billion. This accounted for 90.8% of the total.

The PSA compiles the investment pledges from the government’s six investment promotion agencies: Board of Investments (BoI), BoI-Bangsamoro Autonomous Region in Muslim Mindanao (BoI-BARMM), Clark Development Corp. (CDC), Philippine Economic Zone Authority (PEZA), Subic Bay Metropolitan Authority (SBMA), and Zamboanga City Special Economic Zone Authority (ZCSEZA).

The BoI approved PHP 175.08 billion in foreign investment pledges, accounting for 92.4% of this quarter’s total.

PEZA came in second with PHP 14.03 billion in foreign investment pledges which accounted for 7.4% of the total. This was followed by SBMA with PHP 124.09 million, BoI-BARMM with PHP 110.06 million, CDC with PHP 107.81 million and ZCSEZA with PHP 49.65 million.

Negros Island Region cornered nearly half (45.6%) of the foreign investment commitments with PHP 86.46 billion. This was followed by Calabarzon and Central Visayas with PHP 6.93 billion and PHP 4.35 billion, respectively.

Meanwhile, investment pledges from Filipino nationals rose annually by 103.6% to PHP 525.51 billion in the second quarter. It accounted for 73.5% of the combined pledges worth PHP 715.01 billion.

Foreign and local investments pledged during the second quarter are expected to generate 26,915 jobs once the projects are realized.   

Electricity, gas, steam, and air-conditioning supply industry received the largest amount of approved commitments at PHP 172.74 billion or 91.2% of the total. This was followed by manufacturing with PHP 12.39 billion and administrative and support service activities with PHP 2.84 billion.

“Pledges are pledges. Until we see the approved and actual investment happening, we will have to wait-and-see. This is not to rain on the parade of the great investment pledges performance so far, particularly this [second quarter]. But reality has to set in and approved and actual investments are still the best thing,” Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc., said in an e-mail interview.

Mr. Asuncion said the higher investment pledges are a direct result of President Ferdinand R. Marcos, Jr.’s foreign trips, where he promoted the country as an investment destination.

“Hopefully, this bump in investment pledges will be sustained,” he said.

Mr. Terosa said the weaker peso in the second quarter made investments in certain sectors in the Philippines more attractive.

For the rest of the year, he said a possible recession in some developed countries, the continued weakness of China’s economy and geopolitical tensions may affect investment flows in developing countries like the Philippines.

“I expect investments to be restrained by these conditions in the second half of the year,” Mr. Terosa said.

Foreign investment pledges, which may materialize in the future, differ from the actual foreign direct investments data tracked by the Bangko Sentral ng Pilipinas (BSP). Aside from the projects, the BSP’s monitoring includes other items such as reinvested earnings and lending to Philippine units via their debt instruments. – Lourdes O. Pilar, Researcher