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Philippines' International Investment Position at end-March 2018 Registers Lower Net Liability Position


Preliminary data on the country’s net international investment position showed that the country’s external liability position declined to US$34.1 billion as of end-March 2018, indicating a 21.3 percent improvement from the US$43.4 billion net liability position as of end-December 2017. This development emanated primarily from the US$8.1 billion contraction in total financial liabilities to US$205.9 billion. Total financial assets improved, albeit marginally, to US$171.7 billion as of end-March 2018, from its previous level of US$170.6 billion.

The country’s external financial liabilities fell by 3.8 percent as of end-March 2018, which stemmed mainly from negative revaluation adjustments in the portfolio and direct investment accounts. Foreign portfolio investments (FPI) contracted by 7.9 percent, while foreign direct investments (FDI) decreased by 2 percent at end-March 2018. The revaluation adjustments reflected the 6.8 percent quarter-on-quarter dip in the Philippine Stock Exchange Index (PSEi) as well as the continued depreciation of the Philippine peso against the US dollar, resulting in lower US dollar equivalents of peso-denominated instruments.

Meanwhile, the modest 0.6 percent increment in external financial assets was driven by the expansion in residents’ portfolio investments (by 10.1 percent) and direct investments (by 1.7 percent) abroad. These increases more than offset the 1.3 percent decline in reserve assets during the quarter.

On a year-on-year basis, however, the country’s net external liability position as of end-March 2018 rose by 14.9 percent compared to the US$29.7 billion posted a year ago. Net IIP weakened as the total external liabilities grew by 6.9 percent, which exceeded the 5.5 percent growth in the total external assets. The hefty accumulation of external liabilities was driven by the combined impact of investment inflows and positive revaluation adjustments, particularly in the FDI and FPI. The positive revaluation was reflective of the 9.1 percent increase in the PSEi from 7,311.72 level as of end-March 2017. Meanwhile, the rise in the total external assets by 5.5 percent was attributed largely to the increase in portfolio and direct investments, as well as in other investments.

Across sectors, only the Bangko Sentral ng Pilipinas (BSP) remained to be the sole net lender of resources to the rest of the world as of end-March 2018.

Almost half (47 percent) of the country’s total external financial assets at end-March 2018 were held by the BSP at US$80.7 billion, of which US$80.5 billion were official reserve assets (gross international reserves) of the country. The Other Sectors’ external financial assets accounted for 37.4 percent (or US$64.2 billion) of the country’s total external financial assets, while Banks owned the remaining 15.6 percent (US$26.9 billion).

By type of instrument, about half of the residents’ total external financial assets were reserve assets held by the BSP. Investments in debt instruments issued by foreign affiliates (or intercompany borrowings) and in equity capital constituted 15.6 percent and 12.8 percent of total external financial assets, respectively. The rest were in the form of securities issued by non-residents (10.3 percent), residents’ deposits in banks abroad (7.7 percent), and loans extended to non-residents (5.4 percent).

Meanwhile, about two-thirds of the total external financial liabilities (65.3 percent) were held by the Other Sectors amounting to US$134.5 billion as of end-March 2018. These mostly consisted of non-residents’ holdings of equity capital (33.9 percent) and debt instruments (21.1 percent) issued by local affiliates, equity securities issued by residents (30.3 percent), and loans extended by non-resident creditors (8.9 percent). The General Government’s outstanding external liabilities amounted to US$36.7 billion, while Banks’ total external liabilities stood at US$33.3 billion by end-March 2018.

By type of instrument, the country’s total external financial liabilities to the rest of the world continued to consist mostly of non-residents’ holdings of equity securities issued by local entities (25.8 percent), non-residents’ placements of equity capital in resident affiliates (23.7 percent), and outstanding loans extended by non-resident creditors (19.8 percent).

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