Q3 Witnesses Surge in Foreign Investment Pledges

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The Philippine Statistics Authority (PSA) reported a notable surge in foreign investment pledges, with approved commitments more than doubling in the third quarter compared to the same period a year ago. The data revealed that total foreign investment commitments experienced a remarkable 109% increase, reaching P27.3 billion from the P13.05-billion figure recorded in the corresponding quarter of the previous year.

The growth in foreign investment pledges during the third quarter represents the fastest expansion in two quarters, following a significant 4,455.6% surge in the first quarter of 2023. However, there was a 54% quarter-on-quarter decline from P59.09 billion in the second quarter.

Singapore emerged as the largest contributor to approved investment commitments, accounting for nearly half at P13.04 billion. Taiwan and the United Kingdom followed, with pledges amounting to P3.63 billion (13.3% share) and P3.06 billion (11.2% share), respectively.

Analysts attribute the annual increase in pledges in the third quarter to the government’s initiatives to attract more foreign investors. Union Bank of the Philippines, Inc. Chief Economist, Ruben Carlo O. Asuncion, emphasized the government’s push to draw foreign capital into the country, expressing hopes for these efforts to materialize fully.

Chief Economist at China Banking Corp., Domini S. Velasquez, suggested that recent economic reforms and trade deals might have contributed to enhancing the country’s appeal to foreign businesses. The liberalization reforms and trade agreements implemented by the government have opened up opportunities for increased foreign participation.

However, the quarter-on-quarter drop in pledges is attributed to challenging macroeconomic conditions domestically and internationally. The weaker-than-expected second-quarter gross domestic product (GDP) performance and challenging economic conditions both locally and globally have impacted investor sentiment.

The Philippine GDP grew by a lower-than-expected 4.3% in the second quarter, slowing from 6.4% in the first quarter and 7.5% in the same period in 2022, marking the weakest growth since 2011.

Among the investment promotion agencies (IPAs), the Philippine Economic Zone Authority accounted for 67.1% of total approved foreign investment commitments in the third quarter, amounting to P18.33 billion. Calabarzon (Cavite, Laguna, Batangas, Rizal, and Quezon) received the majority of foreign investment commitments, with P14.56 billion, followed by Central Luzon with P6.13 billion and Central Visayas with P3.87 billion.

The combined investment pledges of both foreign and Filipino nationals witnessed a 47.6% decline to P83.5 billion in the third quarter from P159.38 billion in the previous year. Investment commitments by Filipinos accounted for 67% of the total, reaching P56.19 billion. If realized, these projects are expected to generate 22,571 jobs, reflecting a 20.7% decrease from the expected employment figure in the third quarter of 2022.

Analysts foresee the potential for foreign investments to improve in the coming months, especially considering the resilience shown by the economy in the third quarter. The Philippine economy grew by 5.9% in the third quarter, with a year-to-date average of 5.5%. The government aims for a 6% to 7% GDP growth for the entire year, and expectations are high for economic conditions to become more favorable for investments, particularly in the following year. Public infrastructure investments and planned spending in the medium term are anticipated to create a conducive environment for investors.