The BSP has released the 2016 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.
All sectors generate saving despite headwinds and uncertainties in the external front.
In 2016, the domestic economy’s saving aggregated ₱3,459.9 billion, higher by 9.7 percent than the level in 2015. The non-financial corporations sector remained the top saver with ₱2,020.6 billion, on the back of high profitability of the industry (manufacturing and construction industries) and services sectors (wholesale and retail trade, information and communication, and real estate industries). The household sector secured the second spot at ₱614.5 billion, a modest contraction of 2.9 percent from the previous year’s level, as growth in household consumption outpaced that of income during the year. The general government sector posted saving of ₱582.1 billion, led by the local government units (LGUs), as tax revenue collections improved. Similarly, the financial corporations sector generated saving of ₱242.7 billion on account of higher net interest receipts from intensified lending activities of other depository corporations (ODCs).
Real investments of the domestic economy surge by almost a quarter from the previous year’s level.
Capital accumulation of the domestic economy expanded by 24.4 percent to ₱3,516.4 billion, steered by the non-financial corporations and the general government sectors. The non-financial corporations sector posted the largest investment in capital outlay during the year at ₱1,992 billion, 29.4 percent higher than in 2015. This is in light of heightened construction activities and significant importation of capital goods in the telecommunications, power, and transportation industries during the year. Similarly, the general government sector registered a 24.3 percent increase in capital accumulation to reach ₱828.9 billion, following the National Government’s (NG) aggressive spending on infrastructure projects and modernization of the country’s defense system. The household sector’s real investments totaled ₱667.4 billion—mostly dwelling units. The aforementioned developments more than offset the 24.9 percent contraction in the financial sector’s capital accumulation during the period, down to ₱28 billion, due to mergers and consolidations in the insurance industry along with the BSP’s disposal of real assets.
The domestic economy ends its thirteen-year streak of net lending to the rest of the world (ROW) and becomes a net borrower in 2016.
The domestic economy’s net borrowing from ROW aggregated ₱53.4 billion in 2016 as the saving-investment deficit in the general government and household sectors outweighed the surplus in the financial and non-financial corporations sectors. The general government sector continued to be a net borrower at ₱261.6 billion. The sector met its net funding requirements mainly through (1) currency and deposit withdrawals (₱88.5 billion); (2) debt securities issuances (₱21 billion); and (3) loan availments (₱75.5 billion). The household sector became a net borrower, amounting to ₱52.9 billion in 2016 after being a net lender since 2000. The household sector’s net loan financing aggregated ₱379.3 billion during the year. Meanwhile, the financial and non-financial corporations sectors sustained their net lender position at ₱214.7 billion and ₱46.5 billion, respectively. The financial sector’s net acquisition of assets were dominated by loans (₱1,435.3 billion) and currency and deposits (₱574.2 billion), while those of the non-financial corporations sector were largely in the form of accounts receivables (₱601.6 billion) and currency placements (₱305.8 billion).
Currency and deposits and loans are the most preferred financial instruments in the economy in 2016.
The volume of transactions in currency and deposits soared to ₱1,610.2 billion, more than twofold its level in 2015. This is primarily attributed to the increase in the BSP’s foreign currency reserve deposits with the rest of the world, as well as the surge in the household sector’s deposit placements and currency holdings. Meanwhile, the low interest rate environment, market volatility, and dynamic real investment activities stimulated the demand for loans from the financial system. During the period under review, total volume of loan transactions climbed by 30.4 percent to ₱1,556.5 billion.
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