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FDI, hot money forecasts cut by central bank

FOREIGN direct investment (FDI) and hot money forecasts for the year were lowered by the Bangko Sentral ng Pilipinas (BSP) on Friday, with a senior ocial citing the lingering euro zone crisis and a slowing US economy. The 2012 FDI outlook was scaled down to $1.2 billion from $2 billion, while that for hot money was cut to a net inow of $4.5 billion from $5.7 billion. The new FDI forecast is a little below the $1.262 billion registered last year, while the net hot money net inow forecast remains higher than the $4.078 billion notched in 2011. The adjustments followed Mondays announcement of a lower balance of payments (BoP) position. Both FDI and hot money are under the BoPs capital account component. The BSP also lowered its projection for gross international reserves. The situation in the euro zone is still uncertain although developments during the week were much better than last weeks, central bank Deputy Governor Diwa C. Guinigundo told reporters. Debt woes in the euro zone continue to plague markets despite a reprieve from Greek elections last Sunday. Leaders of France, Italy, Spain and Germany were to meet on Friday to discuss policy moves ahead of a wider European Union meeting next week. Mr. Guinigundo also noted the sluggish performance of the US economy as leading to slower inows. The US Federal Reserve earlier this week cut its 2012 growth outlook for the economy to a range of 1.9-2.4%, down from 2.4-2.9%, and cut forecasts for 2013 and 2014 as well. 1

We expect that investors will assume a wait and see attitude because its a long term commitment on their part, Mr. Guinigundo said. He added that this year, FDI inows are expected to go to the manufacturing, energy and services sectors. Latest BSP data showed FDI up 72% to $850 million in the rst quarter from a year earlier.

Business World Online http://www.bworldonline.com Posted on June 22, 2012