Senate President Francis “Chiz” Escudero downplayed concerns over the $283.7 million net outflow of foreign portfolio investments in January, emphasizing that such capital naturally moves across markets in search of short-term gains.
Escudero issued the remarks on Monday, March 3, after data from the Bangko Sentral ng Pilipinas (BSP) showed that more foreign portfolio investments (FPIs)—also known as “hot money”—continued to exit the Philippines in January amid persistent global economic uncertainties.
Hot money registered with the BSP through authorized agent banks posted net outflows of $283.69 million in January. This figure was nearly four times higher than the $75.83 million outflows recorded in the same month last year.
Foreign portfolio investments (FPIs) are characterized by their rapid movement in and out of a country’s financial markets compared to foreign direct investments (FDIs). Examples of FPIs include securities traded on the Philippine Stock Exchange.
“Hot money refers to funds managed by investors seeking quick returns. When these funds exit a country, it simply indicates that better returns are available elsewhere. This movement does not necessarily reflect a nation’s short-, medium-, or long-term stability or growth outlook,” Escudero said.
“These funds come and go, so they should not be a major concern. What truly matters for economic growth are long-term investments, such as foreign direct investments (FDIs),” Escudero added.
BSP Governor Eli M. Remolona, Jr., for his part, said that the central bank is adjusting its models to better account for ongoing “global trade uncertainties.” This follows the BSP’s unexpected decision to maintain key interest rates at 5.75% during its meeting last month.
In 2024, the Philippines recorded a net inflow balance of $2.1 billion, a significant recovery from the $248.84 million net outflow in 2023.
“In addition, registration of said investments with the BSP, through the authorized agent banks, may not necessarily coincide with either trade or settlement date of the underlying transaction, and thus, such registration may be effected even after the actual foreign investment transaction has long been completed,” the central bank said. (TCSP)
