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Philippines' International Investment Position as of end-March 2015 Registers Higher Net Liability Position Driven by Appreciation of Financial Liabilities

06.30.2015

The country’s preliminary International Investment Position (IIP) registered a net liability position of US$43.2 billion as of end-March 2015, higher by US$2.5 billion than the end-December 2014 net liability position of US$40.7 billion.1,2 This developed as the increase in total external financial liabilities (US$4.2 billion) exceeded the increment in total external financial assets (US$1.7 billion). Total outstanding external financial liabilities reached US$193.4 billion as of end-March 2015, while total outstanding external financial assets amounted to US$150.2 billion.

The increase in total external financial liabilities was due mainly to revaluation adjustments arising from changes in market prices. Moreover, net inflows from non-residents’ investments in equity securities (portfolio investments) and equity capital (direct investments) during the quarter contributed to the increase in financial liabilities as investors’ appetite improved given the country’s strong macroeconomic fundamentals.  Meanwhile, the increase in total external financial assets was primarily on account of investments in debt securities and in debt instruments (direct investments) that were issued by non-resident affiliates.

Across sectors, only the BSP maintained a net external asset position as of end-March 2015 while the rest of the sectors—Banks (i.e., Deposit-taking Corporations except the Central Bank), General Government and Other Sectors—posted higher net external liability positions.

The BSP continued to hold the largest share (54 percent) of residents’ total claims on the rest of the world, amounting to US$81.1 billion as of end-March 2015. The Other Sectors accounted for 31.3 percent (or US$47 billion) of total outstanding financial assets while Banks held the remaining 14.7 percent (US$22.1 billion).

More than half (53.6 percent) of residents’ total holdings of external assets as of end-March 2015 were reserve assets held by the BSP, amounting to US$80.5 billion. Investments in debt instruments issued by foreign affiliates (or intercompany loans) accounted for 14.1 percent of total external financial assets. The rest were residents’ placements in equity capital (10.6 percent), deposits abroad (9.1 percent), and holdings of non-resident issued debt securities (7.6 percent).

The Other Sectors continued to hold the majority of residents’ total liabilities to non-residents, with a 65 percent share as of end-March 2015. The sector’s outstanding liabilities increased by US$5.3 billion (4.4 percent) to US$125.7 billion from US$120.4 billion as of end-December 2014.  These were largely in the form of equity capital placements by non-residents (34.8 percent), issuances of equity securities (34.7 percent) and of debt instruments to foreign affiliates (11.2 percent), and foreign loans (10.7 percent).

The General Government’s outstanding external liabilities amounted to US$36.9 billion as of end-March 2015, accounting for 19.1 percent of total external liabilities to non-residents. The sector’s outstanding external liabilities comprised of issuances of debt securities (58.5 percent) and loans (41.5 percent). The external liabilities of Banks amounting to US$$29.5 billion accounted for 15.3 percent of the country’s total external liabilities as of end-March 2015. The sector’s liabilities were mostly in the form of issuances of equity securities (38.1 percent) and loans (37.5 percent).

Outstanding financial liabilities of residents to the rest of the world consisted largely of non-residents’ holdings of equity securities (US$54.9 billion), non-residents’ placements of equity capital (US$45.7 billion), and foreign loans (US$39.8 billion) equivalent to 28.4 percent, 23.6 percent and 20.6 percent, respectively. Debt securities, mostly issued by the NG comprised 15.8 percent (US$30.5 billion) of these foreign obligations.

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1  The IIP, based on the Balance of Payments and International Investment Position Manual, 6th edition (BPM6), 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.

2  On a year-on-year basis, the country’s net liability position increased by US$3.9 billion from US$39.3 billion as of end-March 2014 as the rise in total external financial liabilities exceeded that of total external financial assets.

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