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Investments contributing more to Philippine economic growth DOF.

Investments contributing more to Philippine economic growth DOF !-- -- Lawrence Agcaoili (The Philippine Star) - February 2, 2019 - 12:00am MANILA, Philippines The economy is becoming more investment-led as the percentage of capital formation to domestic output as measured by gross domestic product (GDP) steadily increased over the past three years. In its latest economic bulletin, the Department of Finance (DOF) said capital formation rose to 27 percent of GDP in 2018 from 25.1 percent in 2017 and 24.4 percent in 2016. The DOF said capital formation is one of the foremost determinants of future growth, in addition to employment and factor productivity.

Furthermore, real growth in capital formation jumped to 13.9 percent last year from 9.4 percent in 2017. "These growth rates compare favorably with the 20-year average of 6.

7 percent," the DOF said. Of the major components of investments, the growth of fixed capital consisting of construction and durable equipment jumped to 15.6 percent in 2018 from 9.

5 percent in 2017. Likewise, the agency noted a sharp increase in foreign direct investments (FDIs) as well as foreign portfolio investments also known as hot money. "These measure the amount of investment coming from foreign investors.

FDI is the more important indicator because it measures the amount of investment in the form of a controlling ownership in a business in one country by foreign investors which implies more active participation and more commitment by the investor in management," DOF said. Latest data from the Bangko Sentral ng Pilipinas (BSP) showed FDIs inched up by 1.

8 percent to $8.53 billion in the first 10 months of last year from $8.37 billion in the same period the previous year. On the other hand, foreign portfolio investments or hot money yielded a net income of $1.2 billion last year, reversing a net outflow of $195.4 million in 2017. "It is distinguished from a foreign portfolio investment by a notion of direct control.

In contrast, a portfolio investor may buy and sell stocks and bonds daily and generates profits on price differences," the finance department said. As a percentage of GDP, the ratio of portfolio investment to GDP rose to 0.

6 percent of 2018 from 0.1 percent in 2016. The third measure of GDP is the approved investments issued by the Department of Trade and Industry.

These are applications for fiscal incentives filed by investors with incentive-providing agencies, primarily Board of Investments and the Philippine Economic Zone Authority (PEZA). The increase in approved investments slowed down to 22.6 percent last year from 29.4 percent in 2017. However, its share in capital formation increased to 27 percent last year from 21.5 percent in 2017. "The continuing rise implies that investors are attracted by the country's favorable economic fundamentals.

The decline in PEZA investment applications may be due to the risks and uncertainties in the export market brought about by the ongoing tariff war and rising protectionism, and the relative attractiveness of the domestic market," the DOF said.

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Publication:Philippines Star (Manila, Philippines)
Date:Feb 1, 2019
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