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2015 Flow of Funds Reports Savings by All Sectors; Non-financial Corporations Sector Leads Net Fund Provision


The BSP has released the 2015 Philippine Flow of Funds (FOF) Report. The FOF presents a summary of financial transactions among the different institutions of the economy, and between these institutions and the rest of the world.  It identifies which institutions are net borrowers and net lenders after a series of financial transactions for the year.  Institutions are categorized into four, namely:   1) financial corporations, 2) non-financial corporations, 3) the general government, and  4) the households.

The domestic economy registers a modest expansion in aggregate nominal savings amid weak global economic outlook.

The domestic economy’s aggregate nominal savings registered a modest growth of 0.4 percent to ₱3,083 billion in 2015. All sectors generated savings, with the non-financial corporations sector leading the pack at ₱1,844.4 billion on the back of strong profitability of the industry and services sectors. In particular, private firms engaged in construction, manufacturing, and electricity supply benefitted from the reduction in operating costs while firms providing wholesale and retail trade services and information and communication services profited from the upbeat consumer spending activities. Aggregate savings of the household sector totaled ₱608.7 billion, 10.6 percent lower than the previous year’s level. This resulted from the faster growth in consumption spending vis-à-vis the households’ disposable income. Meanwhile, total savings of the general government sector reached ₱418.7 billion, underpinned by the improvement in savings of the Local Government Units (LGUs) and the sustained savings of the National Government (NG) and the Social Security Agencies (SSAs). Finally, savings of the financial corporations sector remained firm to reach ₱211.2 billion bolstered by the solid net operating income generated by the banking system.

Capital accumulation of the domestic economy expands as the general government sector’s real investment activities almost doubled.

Real investments of the domestic economy rose to ₱2,734.9 billion in 2015, 5.4 percent higher than the previous year’s level. The non-financial corporations sector continued to account for the bulk of the country’s capital accumulation at ₱1,461.7 billion, despite retreating from the ₱1,682 billion recorded in 2014. In terms of growth, the general government sector led the expansion in real investment activities at ₱663.5 billion fueled by the NG’s accelerated infrastructure spending. Maintenance and capital spending surged particularly in the fourth quarter as government agencies fast-tracked the implementation of programs and projects before the end of the fiscal year. In addition, the households’ continued construction and acquisition of dwelling units as well as the banking system’s initiative to venture on bank acquisitions likewise contributed to the country’s accumulation of capital. Collectively, capital accumulation of the household sector and the financial sector was posted at ₱609.7 billion.

Except for the general government sector, all domestic sectors are net lenders in 2015.

The non-financial corporations sector became the prime net lender at P382.8 billion spurred by increased savings and drawdown in inventories. Meanwhile, growth in net fund provision by the financial corporations sector slowed down to 0.7 percent from 107.8 percent in 2014. The downturn in the sector’s lending stream reflected the subdued loan provisioning of other depository corporations (ODCs).  Similarly, the household sector’s net lending activities slowed down by 64.3 percent to ₱47.1 billion, brought about by the decline in savings combined with the expansion in the households’ gross capital formation. The general government sector reverted from a net lender in 2014 to a net borrower in 2015, with a total borrowing of ₱239.8 billion. This was attributed mainly to the NG’s considerable net borrowing of ₱368.2 billion which were used to fund high public infrastructure outlays following the 29.3 percent decline in its savings. The LGUs and SSAs net lending position partly mitigated the negative performance of the sector.

Net lending by the domestic economy to the rest of the world (ROW) declines.

The domestic economy’s net fund provisions to ROW aggregated ₱353.3 billion in 2015. However, the growth in its net lending activity substantially declined by 26.5 percent from ₱480.9 billion in 2014. The trade-in-goods and -services deficit, which widened by 38.5 percent to US$17.7 billion in 2015, yielded a lower current account surplus of US$7.7 billion than the previous year. Debt securities emerged as the most preferred financial instrument in the economy. During the review period, total volume of transactions in debt securities more than doubled to reach ₱522.7 billion, as the financial sector substantially increased its debt security holdings—particularly foreign-currency denominated debt security issuances of NG and those of non-residents. In addition, the firms’ gradual shift in preference to bond financing resulted in the decline of the total volume of transactions in the form of loans by 9.2 percent to register at ₱1,030.5 billion.

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