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Philippines' International Investment Position as of end-December 2014 Improves: Registers Lower Net Liability Position Quarter-on-Quarter


The country’s preliminary end-December 2014 International Investment Position (IIP), based on the Balance of Payments and International Investment Position Manual, 6th edition (BPM6) improved from its end-September 2014 position. The net liability position decreased by US$4.7 billion to US$40.7 billion from the US$45.4 billion recorded as of the end of the previous quarter. This developed as the rise in total external financial assets (US$7.1 billion) exceeded the increase in total external financial liabilities (US$2.4 billion). Total outstanding external financial assets reached US$148.5 billion as of end-December 2014, while total outstanding external financial liabilities amounted to US$189.2 billion.

The increase in total external assets was due mainly to the outflows in the other investments (particularly residents’ currency and deposits abroad), as well as increases in residents’ investments in external equity capital and debt securities.  As global growth prospects remain solid, particularly in the US, China, and India, residents have explored investment opportunities abroad.  Meanwhile, the increase in total external liabilities was mainly on account of residents’ borrowings from abroad (other investment account) coupled with the increase in non-residents’ equity capital investments (foreign direct investment).

Across sectors, only the BSP maintained a net external asset position as of end-December 2014 while the rest of the sectors—Banks (or Deposit-taking Corporations except the Central Bank), General Government and Other Sectors—posted  net external liability positions, albeit lower than their net liability positions as of end-September 2014.

The BSP continued to hold the largest share of residents’ total claims on the rest of the world, amounting to US$80.1 billion (53.9 percent) as of end-December 2014, albeit lower than the US$80 billion holdings as of end-September 2014. The Other Sectors accounted for 30.3 percent or US$45 billion of total outstanding financial assets while banks held the remaining US$23.4 billion
(15.8 percent).

More than half (53.5 percent) of residents’ total holdings of external assets as of end-December 2014 were reserve assets held by the BSP, amounting to US$79.5 billion. Investments in debt instruments or intercompany lending accounted for 13.6 percent of total external financial assets, equity capital (10.5 percent), residents’ deposits abroad (10 percent), and debt securities (6.7 percent).

The Other Sectors continued to hold the majority of residents’ total liabilities to non-residents, with 63.6 percent share as of end-December 2014. The sector’s outstanding liabilities increased by US$0.3 billion (by 0.3 percent) to US$120.4 billion as of end-December 2014 compared with end-September 2014.  These were largely in the form of equity securities (34.5 percent), equity capital (34.3 percent), debt instruments (11.3 percent), and currency and deposits (11.1 percent). The General Government’s outstanding external liabilities accounted for 19.4 percent of total external liabilities to non-residents while banks held 16.2 percent of the total.

Outstanding financial liabilities of the domestic economy to the rest of the world consisted largely of non-residents’ holdings of equity securities (US$51.2 billion), equity capital (US$43.5 billion), and foreign loans (US$42.5 billion) equivalent to 27.1 percent, 23 percent and 22.4 percent respectively. Debt securities, mostly NG issuances, comprised 16 percent (US$30.4 billion) of these foreign obligations.

On a year-on-year basis, however, the country’s net liability position was higher by US$4.7 billion compared with the end-December 2013 net liability position of US$36 billion.  This transpired as the full-year 2014 net acquisition of financial assets by residents of US$7.2 billion (balance of the financial account, including reserve assets) was more than offset by revaluation adjustments, particularly on equity securities investments by non-residents.

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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