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Philippines' International Investment Position as of End-September 2014 Declines as the Value of External Liabilities Appreciates


The country’s International Investment Position (IIP) based on the Balance of Payments and International Investment Position Manual, 6th edition (BPM6) continued to post a net liability position as of end-September 2014 of US$51.4 billion. This was higher by US$1 billion than the end-June 2014 level of US$50.4 billion as the increase in the country’s total external financial liabilities (by US$1.7 billion) exceeded the increase in total external financial assets (by US$0.6 billion).

Total outstanding external financial liabilities reached US$191.3 billion as of end-September 2014 from US$189.6 billion as of end-June 2014, while total outstanding external financial assets reached US$139.8 billion from US$139.2 billion. The US$1.6 billion increase in net asset position due to transactions during the third quarter of 2014 was more than offset by the negative revaluation adjustments on assets (particularly on the BSP’s international reserves) and the positive revaluation adjustments on liabilities (as domestic assets consisting mostly of equity securities appreciated in value). This is on the back of the continued confidence of foreign investors in the country’s strong macroeconomic fundamentals, including the credit rating upgrade by Japan-based Rating and Investment Information, Inc. (R&I) in July 2014. This reflected the improved performance of the domestic equities market, contributing to the appreciation of the value of domestic assets that were held by non-residents.

The BSP continued to maintain a net external asset position as of end-September 2014 while the rest of the sectors (Deposit-taking Corporations (or Banks), General Government, and Other Sectors) posted net external liability positions. Banks, however, recorded a lower net liability position relative to its position as of end-June 2014.

The BSP held the largest share of residents’ total claims on the rest of the world, amounting to US$80 billion (57.2 percent) at end-September 2014. The Other Sectors accounted for 28.8 percent (US$40.2 billion) of total outstanding financial assets while Banks held the remaining US$19.6 billion (14 percent).

More than half (56.9 percent) of residents’ total holdings of external assets as of end-September 2014 were mostly reserve assets held by the BSP amounting to US$80 billion. Investments in debt instruments accounted for 13.7 percent of total external financial assets while residents’ deposits abroad (9.7 percent), investments in equity capital (8.9 percent), and holdings of debt securities (5.9 percent) combined for 24.5 percent of the total.

The Other Sectors continued to hold the majority of residents’ total liabilities to non-residents, with 65.1 percent share as of end-September 2014. The sector’s outstanding liabilities, at US$124.5 billion as of end-September 2014, were largely in the form of foreign direct investments (47.7 percent) and portfolio investments (39.4 percent). The General Government recorded US$37.4 billion external liabilities as of end-September 2014, equivalent to 19.5 percent of total liabilities to non-residents. Total external liabilities of Banks, amounting to US$27.9 billion, accounted for 14.6 percent of the country’s total external liabilities as of end-September 2014.
Outstanding financial liabilities of the domestic economy to the rest of the world consisted largely of non-residents’ holdings of equity securities (US$51.1 billion) and equity capital (US$47.1 billion) equivalent to 26.7 and 24.6 percent, respectively.  Foreign loans accounted for 20.7 percent (US$39.6 billion) while debt securities – bonds and notes – issued by the NG and Other Sectors comprised 16 percent (US$30.5 billion) of these foreign obligations. 

The IIP is a companion framework to the Balance of Payments (BOP) statistics.  While the BOP is a statistical statement that records the country’s transactions or flows with the rest of the world for a given period, the IIP summarizes the country’s stock of financial claims on and financial liabilities to the rest of the world as of a specific reporting period.  Similar to the BOP’s financial account, the assets and liabilities in the IIP are classified as direct investments, portfolio investments, financial derivatives, and other investments.  The BSP has started releasing quarterly IIP statistics in 2014 in compliance with the International Monetary Fund’s (IMF) recommendation of enhancing the Special Data Dissemination Standard (SDDS) to improve the availability and timeliness of compiling and disseminating IIP data.

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