MANILA, Nov. 12 (Xinhua) -- The worsening debt crisis in the Eurozone, particularly in Italy and Greece, coupled with the economic uncertainties in the United States, has pulled down the flow of foreign direct investments (FDI) into the Philippines in August dashing hopes of the government of President Benigno S. Aquino for a stronger economic growth this year.
Although the Bangko Sentral ng Pilipinas (BSP), the country's central bank, has reported that there was still a net inflow of FDI in August amounting to 50 million U.S. dollars, it was, however, lower by 55 percent compared to the figure in August 2010.
In a statement posted on its website, the BSP said that developments in Europe and the United States have caused investor risk aversion to rise sharply.
"Notwithstanding the Philippines' solid macroeconomic fundamentals, global economic setbacks, particularly the financial strains arising from the sovereign debt crisis in Euro area periphery and the sluggish growth experienced in the U.S., have profoundly affected economic prospects," the BSP said.
As a result, cumulative FDI inflows for the eight-month period totaled only to 810 million U.S. dollars, or a 19.2 percent decline from the 1 billion dollars net inflows posted in the same period a year ago.
But the BSP said the net FDI inflows for the first half of 2011, which totaled 779 million U.S. dollars, was still higher by 16.4 percent compared to the 669 million dollars net inflows recorded in the same period a year ago.
According to the BSP, foreign direct capital in August that came from the United States, Japan, China's Hong Kong, the Republic of Korea and Singapore, were channeled mainly to real estate, manufacturing, mining and quarrying, utilities and wholesale and retail trade sectors.
The announcement on the drop of the FDI came on the heels of two negative economic indicators that could further trim down the gross national product (GDP) growth forecast for this year.
Philippine exports suffered a huge 27.4 percent decline in September compared to that of last year, its biggest fall since January 2009.
The National Statistics Office (NSO), a government agency monitoring the country's economic indicators, said that the big export contraction in September was mainly due to the decline by 47.9 percent of Philippine electronics exports during the month.
Total receipts from electronic exports, still the country's top export product, was valued at only 1.81 billion dollars compared to 3.48 billion dollars registered in September 2010.
On a monthly basis, electronic exports contracted by 12.6 percent from 2.07 billion dollars posted in August 2011.
The decline in electronics exports was due to the low demands in Japan and the United States, the Philippines' top export destinations with both countries suffering from a prolonged economic downturn.
Also in August, the government's debt stock rose to 4.79 trillion pesos (111.48 billion U.S. dollars), up by 1 percent, from the July level primarily due to a weaker Philippine peso and a net issuance of domestic securities.
This means that with the country's population at 95.6 million, every Filipino citizen has now an outstanding debt of 50,141 (1, 166 U.S. dollars).
Bureau of the Treasury (BT) data showed that 58 percent of the country's outstanding debt, or 2.757 trillion pesos (64 billion U. S. dollars), was borrowed from domestic lenders while local debt increased by 0.8 percent, from the figure posted in July.
The increase was attributed to the government having issued more local debt papers compared with new ones that were redeemed.
Analysts said that the increase in foreign debt was due mainly to the depreciation of the peso against the U.S. dollar, which added 15 billion pesos to the debt stock. The appreciation of the yen and the euro against the dollar also pushed up the country's total foreign debt by an additional 8 billion pesos.
Despite these unfavorable economic indicators, BSP Governor Amando Tetangco continues to be confident that the Philippine economy will be able to weather the setbacks brought about by the worldwide financial turmoil.
In a recent speech, Tetangco described the structural makeup of the Philippine economy as "self-sustaining" since a large part of its GDP is attributed to robust household consumption.
On top of that, Tetangco said, remittances from overseas Filipino workers have remained on the uptrend, reaching 13 billion dollars in the first eight months of the year.
"By sustaining an environment of stable prices and healthy financial institutions, it is our belief that domestic consumption is likely to remain solid and vigorous," Tetangco said.
Tetangco said that the BSP has been able "to strike an effective policy balance of supporting economic growth while maintaining stable inflation by being forward-looking and taking preemptive policy actions."
He said that baseline forecasts showed a lower inflation path, consistent with the 3-5 percent target range for 2011-2013, while inflation expectations remain well-contained, supported by easing commodity prices.