THE biggest revelation that came out of Congress hearings on the proposed national budget for 2018 was the significant drop in new foreign investments in the first half of this year.
What that means to an individual and how that would impact on the person’s ability to maintain a standard of living are the information needed to understand the economic situation in relation to the country’s future.
The National Economic and Development Authority (Neda) had to defend its 2018 budget before Congress but what struck some legislators as shocking was the report on a drop in foreign direct investments.
Senate Minority Leader Franklin Drilon asked, “Why such a huge drop? Is this an indication of anything?” A SunStar Philippines report on the hearing said foreign equity placements other than reinvestments of earnings decreased by 90.3 percent during the first six months of 2017 ($141 million) compared with the same period in 2016 (US$1.448 billion). Data source was the Bangko Sentral ng Pilipinas. The drop reportedly was because of restrictions on investors.
According to Investopedia.com, foreign direct investments are physical investments and purchases made by a company in a foreign country, typically by opening plants and buying buildings, machines, factories and other equipment in the foreign country. “These types of investments find a far greater deal of favor, as they are generally considered long-term investments and help bolster the foreign country’s economy,” it added.
Drilon spoke of the need to build investor confidence and of how the “current political climate” affected it.
Also cited by Drilon were The 2018 Asean Business Outlook Survey published by the American Chamber of Commerce in Singapore and the United States Chamber of Commerce that said, among the companies surveyed, only 22 percent chose the Philippines as a possible expansion location, with Vietnam topping the list (34 percent). The Philippines ranked sixth, lagging behind Vietnam, Myanmar (29 percent), Indonesia (29 percent), Thailand (26 percent), and Cambodia (23 percent). The Association of Southeast Asian Nations has 10 member states.
Then, there is also the case of the depreciating Philippine peso. Drilon said the peso depreciated by 6.5 percent from January to August of this year. His forecast is that it would weaken further to P52.50 to US$1 by end of 2017.
Despite reports on the drop in foreign investments and the peso depreciation, the country’s economic managers, Neda and the Budget and Finance departments, are confident the proposed P3.7 trillion budget for 2018 could be financed by domestic and foreign borrowings and by keeping a low deficit.
They said the country’s resilient economy could fund growth in spite of the reduction in foreign investment.
Which perspective is to be believed rests on how these changes will affect the buying power of an individual, his or her ability to keep a standard of living like having shelter, education for the children and access to health care, and the capacity to dream for self and family.