MANILA, Philippines – Despite the turnaround of foreign direct investments to a net inflow in May, the research arm of Metropolitan Bank & Trust Co. said attracting more remains a growth constraint for the Philippines.
“Robust foreign investment has been supporting the growth in other Asian economies – generating much-needed employment, raising incomes, increasing economic activity, and deepening technologies,” Pauline Revillas, research analyst at Metrobank, said in a report.
“The support from FDIs should not be underscored as the robust economic expansion last year was underpinned by the solid performance of investment spending,” she said.
“The lack of infrastructure and the failure to attract FDIs have long been seen as a critical growth constraint to the domestic economy, but the government has been firm in its commitment to improve and develop the country’s infrastructure system,” Revillas further said.
The country’s FDIs reached $473 million in May, a turnaround from a net outflow of $62 million in the same month last year. This brought the five-month net FDI inflow total to $2.923 billion, up 34 percent from $2.182 billion in the same period in 2013.
The Bangko Sentral ng Pilipinas attributed the increase in FDI inflows to sustained confidence of foreign investors in the country’s sound macroeconomic fundamentals.
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“The sustained increase in FDIs would help ensure a sustainable and inclusive economic growth moving forward,” Revillas said.
The Philippine economy grew by a lower-than-expected 5.7 percent in the first quarter of the year, but government officials kept their 6.5 to 7.5 percent full-year growth expansion target.
Last year, the economy expanded by a stellar 7.2 percent from another faster-than-expected 6.8 percent in 2012.
But Revillas said, the need for higher FDIs cannot be further emphasized especially when we look at the FDI flows of our ASEAN (Association of Southeast Asian Nations) peers.”
In the first quarter alone, the Philippines recorded a net FDI inflow of $1.852 billion, lower than Indonesia’s $4.527 billion, Thailand’s $2.887 billion, and Vietnam’s $2.45 billion.
“The Philippines continued to lag behind other Asian economies,” she said.