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Philippines' Net External Liability Position as of end-September 2017 Increases


The country’s preliminary net international investment position (IIP)1 registered a net external liability position of US$35.2 billion as of end-September 2017, an increase of 5.1 percent from the US$33.5 billion net external liability position as of end-June 2017. The higher negative balance was reflective of the 1.8 percent increase in total external financial liabilities for the period which outpaced the 1.1 percent growth in total external financial assets. As of end-September 2017, total outstanding external financial liabilities reached US$201.8 billion, while total outstanding external financial assets amounted to US$166.6 billion.

The stock of external financial liabilities during the quarter grew mainly on account of the 4 percent increase in foreign direct investments (FDI) and the 1.5 percent growth in foreign portfolio investments (FPI). The build-up was reflective of the significant investment inflows and positive price revaluation of non-residents’ holdings of local equity capital and equity securities on the back of the country’s sustained positive economic performance and growth prospects.

Meanwhile, the improvement in external financial assets during the quarter was due to the accumulation of portfolio (6 percent growth), direct (1.9 percent growth), and other investments (1.6 percent growth) abroad by residents despite the drop in the country’s reserve assets.

The Bangko Sentral ng Pilipinas (BSP) registered a net external asset position as of end-September 2017 albeit lower than the level posted a quarter ago. In contrast, the other major sectors – Deposit-taking Corporations (Banks, except the Central Bank), General Government, and Other Sectors – remained net users (borrowers) of foreign resources. Nonetheless, the net external position of Banks and the General Government continued to improve.

Almost half (48.6 percent) of the country’s total external financial claims, totaling US$81 billion, were held by the BSP. The BSP’s gross international reserves (GIR), which comprised the bulk of its external financial assets, declined by 0.4 percent during the quarter to post US$81 billion as of
end-September 2017.

By type of instrument, about half (or US$81 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 15.1 percent and 12.5 percent of total external financial assets, respectively.

Total external financial liabilities of the Other Sectors comprised almost two-thirds of the country’s total external liabilities at US$133.2 billion as of end-September 2017. These were mostly non-residents’ placements in equity capital and debt instruments issued by local affiliates, equity securities issued by local corporations, and loans extended by non-resident creditors.

The country’s total external financial liabilities to the rest of the world consisted mostly of non-residents’ holdings of equity securities issued by local corporations (27.3 percent), non-residents’ placements of equity capital in resident affiliates (23.2 percent), and foreign loans extended by non-resident creditors (20.3 percent).

On a year-on-year basis, the country’s net external liability position as of end-September 2017 was higher by 23.8 percent than the US$28.4 billion posted a year ago. The higher net external liability position was brought about by the 4.1 percent expansion in the external financial liabilities which broadly outpaced the 0.7 percent increase in external financial assets. The expansion in liabilities reflected the higher outstanding debt instruments held by non-resident affiliates (FDI) and increased holdings by non-residents of equity securities issued by residents (FPI). Meanwhile, the growth in external assets emanated from residents’ other investments, particularly loans extended by local banks to non-residents, direct investments in the form of equity capital, and portfolio investments abroad.

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

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