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Philippines' International Investment Position as of end-March 2016 Registers Higher Net Liability Position

06.30.2016

The country’s preliminary net external liability position as of end-March 2016 increased slightly (by 3.9 percent) to US$30.1 billion from US$29.0 billion as of end-December 2015. The deterioration in the country’s International Investment Position (IIP)came after three consecutive quarters of improvement (decline in net external liability position). Total external financial liabilities increased by US$6.3 billion (or by 3.4 percent), exceeding the US$5.2 billion build-up (or by 3.4 percent) in total external financial assets. As of end-March 2016, total external financial liabilities reached US$190.4 billion while total external financial assets stood at US$160.3 billion.

The growth in external financial liabilities during the quarter was buoyed by increases in Foreign Direct Investments (FDI) and Portfolio Investments. Non-residents’ placements of equity capital and intercompany lending to resident affiliates grew by 5.8 percent and 7.5 percent, respectively, on the back of the country’s sustained positive economic performance and growth prospects. Meanwhile, the 3.5 percent increase in Portfolio Investments was due largely to positive price revaluations of  non-residents’ holdings of domestic equity securities as the Philippine Stock Exchange Index (PSEi) appreciated by 4.6 percent during the quarter.

On the assets side, the 3.4 percent rise in total external financial assets during the quarter was driven mainly by positive revaluation adjustments in Reserve Assets.  Increases in Portfolio Investments and Other Investments, particularly residents’ placements in debt securities issued by non-residents and deposits abroad, also contributed to the increase in total external financial assets.

Across sectors, only the Bangko Sentral ng Pilipinas (BSP) recorded a net external asset position as of end-March 2016. The other major sectors – Deposit-taking Corporations except the Central Bank (Banks), the General Government, and Other Sectors – posted net external liability positions. The net external positions of the BSP and Banks registered improvements while those of the General Government and the Other Sectors showed deterioration vis-à-vis the previous quarter.

The BSP continued to account for the largest share of the Philippines’ total external financial claims on the rest of the world at 52.2 percent.  The Other Sectors’ total external financial assets amounted to US$52.8 billion, representing about one-third of the country’s total external financial assets. Banks accounted for the remaining 14.9 percent of the country’s total external financial assets amounting to US$23.8 billion, higher than the US$22.3 billion recorded as of end-December 2015.

By type of instrument, 51.8 percent or US$83.0 billion of residents’ total external financial assets were reserve assets held by the BSP. Direct investments in the form of debt instruments (or intercompany lending) and equity capital placements in foreign affiliates accounted for 15.4 percent and 10.5 percent of total external financial assets, respectively.

The Other Sectors’ total external financial liabilities reached US$122.6 billion as of end-March 2016, almost two-thirds (64.4 percent) of the country’s total external liabilities. The General Government’s external liabilities as of end-March 2016 totaled US$36.7 billion, comprising about one-fifth of the country’s total external financial liabilities.  Banks’ total external liabilities reached US$29.9 billion, equivalent to 15.7 percent of the country’s total external liabilities.

The country’s total external financial liabilities to the rest of the world consisted mostly of
non-residents’ investments in equity securities issued by local corporations (24.9 percent),
non-residents’ placements of equity capital in resident affiliates (23.6 percent), and foreign loans
(22.8 percent).

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1 Based on the International Monetary Fund’s Balance of Payments and International Investment Position Manual, 6th edition (BPM6)

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