News Analysis: Philippine FDI inflow, exports, manufacturing show signs of slowdown

After the unexpected slow economic growth of only 5.2 percent in the first quarter, the slowest in three years, the three major economic indicators in the Philippines, namely foreign direct investment (FDI), exports and manufacturing, have also showed signs of slackening.

On Wednesday, the Bangko Sentral ng Pilipinas (BSP), the country's central bank, said that inflow of long-term FDI into the country in March declined to 229 million U.S. dollars, down by 54. 6 percent compared to that of the same month last year.

On a cumulative basis, FDI registered a net inflow of 851 million U.S. dollars for the first quarter of 2015, which is lower by 50.4 percent compared with the 1.7 billion U.S. dollars net inflow posted in the same period last year.

The BSP said that all FDI components recorded lower net inflows in the first quarter. In particular, non-residents' net investments in debt instruments declined by 54.6 percent to 412 million U.S. dollars from 907 million U.S. dollars.

Similarly, net equity capital investments contracted by 54 percent to 254 million U.S. dollars from 553 million U.S. dollars, the BSP said.

Net FDI inflows in 2014 reached a record high of 6.2 billion U. S. dollars but were still small compared with other emerging Asian economies because of the country's poor infrastructure, high power costs and foreign ownership restrictions in key industries.

In April, the value of Philippine exports also fell by 4.1 percent year-on-year as demand in major markets remained fragile.

The 4.38 billion U.S. dollars in export sales posted last April were lower than the 4.56 billion U.S. dollars recorded in the same month last year, bringing total exports during the first four months of 2015 to 18.62 billion U.S. dollars.

This was 1.2 percent lower than the 18.84 billion U.S. dollars recorded at the end of April 2014.

The Philippine Statistics Authority (PSA) also reported that growth in manufacturing activities slowed last April despite the higher output in basic metals, beverages, chemicals, tobacco, furniture and fixtures, leather, machinery (except electrical), paper and paper products, printing, and textiles.

The manufacturing sector's value of production (VaPI) last April dropped by 4.2 percent, reversing the 10.9 percent growth seen a year ago and the 9.7 percent expansion posted in March.

In a statement, Socioeconomic Planning Secretary Arsenio M. Balisacan said that the decline in exports "is partly reflective of fragile global economic conditions, as most trade-oriented economies in East and Southeast Asia also registered negative export performance in April, with only Vietnam in positive territory."

He said there has been weaker demand for Philippine-made products from traditional trading markets such as the United States and Japan as well as China.

"The softening of economic activity in China [and] the still fragile economic growth of Japan remains a downside risk for the Philippine export sector," he said.

Balisacan, who is also director-general of the National Economic and Development Authority (Neda), warned that in the near- term, "the country's export sector remains vulnerable to declining demand" from major trading partners.

Earlier, Balisacan has expressed confidence that despite the temporary setbacks, the Philippines will be able to achieve its gross domestic product (GDP) full-year target of 7 to 8 percent in 2015.

But Budget Secretary Florencio "Butch" Abad, another top economic manager, has admitted that economic growth in the coming months might continue to slow down as the government deals with a "technical deficit" that has kept it from being faithful to its annual budget.

Under-spending has emerged as a chronic problem for the administration of President Benigno Aquino III. Last year, the government failed to spend a major chunk of its annual budget due to bureaucratic red tape that resulted in the country's having a year-round GDP growth of only 6.1 percent, falling short of the state's 6.5 to 7.5 percent target range.

The situation may have worsened this year as first-quarter figure showed growth slowing further to 5.2 percent, short of the more ambitious goal of 7 to 8 percent this year.

"The truth is, the bureaucracy [is] unprepared to support growth target," Abad said. Endi