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2008 Flow of Funds Shows Savings in All Sectors; Household Sector is the Top Net Lender


The BSP has released the 2008 Flow of Funds (FOF) Report. The FOF presents a summary of financial transactions among the different institutions of the economy, and between these institutions and the rest   of the world.  It identifies which institutions are net borrowers and net lenders in the series of financial transactions.  Institutions are categorized into four (4), namely, 1) financial corporations, 2) non-financial corporations, 3) the general government, and 4) the household sector.


1.  All sectors generate savings but total savings is lower than that of the previous year as economic growth slackens.

 All sectors recorded savings in 2008, albeit at a level lower than the previous year’s level as soaring commodity prices as well as the global financial and economic downturn dented the economy’s performance. Gross Domestic Product (GDP) growth slackened from 7.1 percent in 2007 to 3.8 percent in 2008, the lowest in 7 years. The household sector posted savings of P573.2 billion, dislodging the non-financial corporations as the prime saver in the economy. The 34.3 percent growth in households’ savings in 2008 was largely driven by remittances from overseas Filipinos, which rose by 13.7 percent  year-on-year to reach US$16.4 billion in 2008. The non-financial corporation sector was the second  highest saver at P440.4 billion. This level was, however, 31.4 percent lower than the previous year’s level due to the substantial drop in profits of the manufacturing sector as prices of raw materials, salaries and wages, and overhead costs increased. The general government sector—which consists of the national  and local governments and social security agencies (such as public pension funds)—registered a P34.8 billion increase in savings to P239.2 billion, which was 17.0 percent higher than the 2007 level. This was largely due to the higher premium receipts of the public pension funds. Similarly, the financial sector managed to stay afloat in the midst of global financial fragilities. However, its P54.0 billion savings was 28.8 percent lower than the 2007 level, due mainly to the decline in profits of the non-bank financial corporations as receipts of dividends, commission, and service fees dropped.

2.  Capital accumulation sustains its double-digit growth.

Capital accumulation (real investment) sustained a double-digit growth at 10.7 percent, lower than the 16.9 percent recorded in 2007. The increase in capital formation was due to the 34.5 percent increase in general government capital spending and to the 27.8 percent increase in household sector’s investments largely in residential properties. In contrast, the non-financial corporation and the financial sectors posted a P26.1 billion and P19.2 billion decline in capital expenditures, respectively, given reduced profits and the weak business outlook.  Capital accumulation in the financial sector fell by 49.4 percent to P19.7 billion in 2008 from P39.0 billion in 2007 as the growth in the acquisition of real assets was outpaced by the growth in the disposal of bad assets.

3.  Financial corporations, general government and households remain as net lenders while non-financial corporations reverse to being a net borrower.

The household sector emerged as the top net lender at P138.2 billion, 58.8 percent higher than the P87.1 billion recorded in 2007. This was traced to the rise in households’ investments in securities other than shares at P120.7 billion compared to the previous year’s P28.5 billion. Given the cautious investment sentiment, households shifted their placements away from equity shares to safer instruments,         particularly government securities and currencies and deposits. The financial corporation sector maintained its net lender position at P34.4 billion in 2008. However, net lending by the sector was 6.6 percent lower compared to its 2007 level, as placement in most financial instruments contracted. For the second consecutive year, the general government sector was a net lender at P8.8 billion in 2008 mainly on account of the social security agencies’ net lending that more than offset the national government net borrowing position. On the other hand, the non-financial corporation sector became a net borrower at P3.6 billion, after four successive years of being a net lender, as corporate income declined due to the crisis.

4.  The country sustains its net lending position to rest of the world but at a level lower than that of the previous year. 

Since 2003, the domestic economy has been a net lender to rest of the world. However, its net lending of P177.8 billion to the rest of the world in 2008 was only about half of the P329.6 billion level posted in 2007. This ensued as net account receivables and currency and deposits placements vis-à-vis non-residents declined significantly following the decline in goods exports.

View 2008 FOF Table 1
View 2007 FOF Table 2
Download Report

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