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

09.30.2016

The country’s preliminary net external liability position1 as of end-June 2016 increased slightly (by 5.6 percent) to US$33.4 billion from US$31.6 billion as of end-March 2016. Total external financial liabilities increased by US$6.2 billion (or by 3.2 percent), exceeding the US$4.4 billion build-up (or by 2.8 percent) in total external financial assets. As of end-June 2016, total external financial liabilities amounted to US$196.1 billion, while total external financial assets stood at US$162.8 billion.

The growth in external financial liabilities during the quarter was buoyed by increases in net inflows of Foreign Direct Investments (FDI), both intercompany borrowing by resident affiliates
(by 10.6 percent) and equity capital (by 2.1 percent), on the back of the country’s sustained positive economic performance and growth prospects. Meanwhile, the 4.0 percent increase in Foreign Portfolio Investments (FPI) was due mainly to the positive price revaluations of non-resident’s holdings of domestic equity securities as the Philippine Stock Exchange Index (PSEi) appreciated by 7.4 percent during the quarter.

Total external financial assets during the quarter increased by 2.8 percent driven mainly by the build-up of the country’s reserve assets. Increases in residents’ lending to non-residents’ affiliates and  residents’ investments in debt securities issued by non-residents also contributed to the growth of the country’s total external financial assets.

Across sectors, only the Bangko Sentral ng Pilipinas (BSP) maintained a net external asset position as of end-June 2016. The other major sectors – Deposit-taking Corporations except the Central Bank (Banks), the General Government, and Other Sectors – remain net users of foreign resources. Compared to the previous quarter, only the BSP registered a net asset position, while those of Banks, General Government, and Other Sectors posted net external liability positions.

The BSP continued to account for the largest share of the Philippines’ total external financial claims on the rest of the world at 52.8 percent. The BSP’s external financial assets totaled US$86.0 billion, 2.7 percent higher than US$83.7 billion recorded as of end-March 2016. The BSP’s gross international reserves also grew by 2.8 percent to reach US$85.3 billion as of end-June 2016. This was due mainly to upward valuation adjustments of the value of BSP’s holdings of monetary gold as well as investments in debt securities.

By type of instrument, 52.4 percent or US$85.3 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 16.1 and 10.6 percent of total external financial assets, respectively. Residents’ investments in debt securities issued by non-residents and residents’ deposits in banks abroad accounted for 8.6 percent and
7.5 percent respectively.

The Other Sectors’ total external financial liabilities reached US$125.5 billion as of end-June 2016, almost two-thirds (64.0 percent) of the country’s total external liabilities. These mostly consisted of non-residents’ placements in equity capital in local affiliates (34.8 percent), non-residents’ investments in equity securities issued by local corporates (31.0 percent), and non-residents’ investments in debt instruments issued by residents (15.3 percent).

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 (25.9 percent), non-residents’ placements of equity capital in resident affiliates (23.5 percent), and residents’ availment of foreign loans (22.6 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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