Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno is optimistic the country will benefit from redirection or redistribution of foreign direct investments (FDIs) due to the pandemic.
In a statement Thursday, Diokno said FDI will be affected by the projected global contraction, disruption of world value chains, and the consequent effect on investment decisions and plans.
He said the Philippines is no exception but considers this impact to be temporary, citing “on the positive side, we see an opportunity for countries, such as the Philippines, to gain from recent experience.”
“As a result of the global demand shock —combined with the worsening US-China trade war— a positive outcome that could benefit the Philippines is the likely redirection or redistribution of FDI flows as MNCs (multinational companies) take steps to better hedge against supply chain disruptions in the future,” he added.
Diokno said FDIs could move into economies with strong macroeconomic fundamentals and commitment for reforms.
“In the Philippines, the latter will include efforts to lower corporate income tax, rationalize fiscal incentives, and ease limits on foreign ownership,” he added.
BSP is projecting $8.8 billion FDI this year.
Last year, it posted net inflows amounting to $7.6 billion, 23.1 percent lower than year-ago’s $9.9 billion, which authorities traced to uncertainties in the global economic environment.
Diokno said monetary authorities are currently reviewing their balance of payment (BOP) forecast for this year given the impact of the pandemic.
“With the unprecedented coronavirus pandemic and its adverse impact on global outlook and investor confidence, we recognize that any projection on external account performance would only be tentative and would have a high level of uncertainty,” he said.
The BOP, which is the sum of the country’s total transaction with the rest of the world, is projected to hit $3-billion surplus this year.
Last year, the BOP surplus reached $7.84 billion.
Last February, the country registered a $516-million deficit, lower than the $1.355-billion deficit in the previous month.
Diokno said “forecasts will be based on some scenario assumptions and estimates which would tend to have considerable uncertainty as they impact on baseline projection prior to the coronavirus outbreak.”
“Nonetheless, BSP will release its external account forecast based on firmer market indications once approved by the Monetary Board,” he added. (PNA)