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Philippines Posts a Net Liability Position of US$28.4 Billion as of end-June 2018


Preliminary data on the country's international investment position (IIP) showed that the country's external liability position amounted to US$28.4 billion as of end-June 2018, lower by 16.2 percent than the US$33.9 billion recorded in the previous quarter. This development emanated primarily from the US$7.7 billion contraction in the country's total financial liabilities to US$198.2 billion, which outweighed the US$2.2 billion decline in total financial assets to US$169.9 billion during the review period.

The country’s external financial liabilities as of end-June 2018 declined due mainly to the revaluation adjustments, particularly in direct and portfolio equity instruments.  The negative revaluation adjustments mirrored the 9.9 percent quarter-on-quarter dip in the Philippine Stock Exchange Index (PSEi) to 7,193.68 at end-June 2018.  Furthermore, the continued   depreciation of the Philippine peso against the U.S. dollar contributed partly to the decrease in financial liabilities, as peso-denominated instruments posted lower U.S. dollar equivalents. These negative revaluation adjustments more than offset the continued inflows of foreign direct investments to the economy during the quarter.

Meanwhile, the 1.3 percent drop in the country’s external financial assets reflected the US$3 billion decrease in the BSP’s reserves from the previous quarter’s level.

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-June 2018.

The BSP continued to account for almost half (US$77.7 billion) of the country’s total financial assets, of which 99.8 percent were official reserve assets (gross international reserves) of the country. The Other Sectors accounted for the second largest share of the country’s external financial assets at 38.7 percent or US$65.7 billion, while Banks held the remaining 15.6 percent or US$26.5 billion.

By type of instrument, nearly half (45.6 percent or US$77.5 billion) of the total external financial assets are reserve assets of the BSP. Direct investments constitute about one third of the country’s total external financial assets, comprising of debt instruments and equity capital amounting to US$28.8 billion and US$22.2 billion, respectively.

Meanwhile, about two-thirds or US$129.9 billion of the country’s total external financial liabilities was comprised of the Other Sectors’ liabilities to the rest of the world.  This was US$4.6 billion or 3.4 percent lower than the level in the previous quarter due largely to the negative revaluation adjustments in non-residents’ equity shares in both affiliate and non-affiliate investees.  The General Government’s total outstanding external liabilities to the rest of the world reached US$35.8 billion as of end-June 2018, comprising 18.1 percent of the total, while Banks’ liabilities amounted to US$31.2 billion or 15.7 percent of the country’s external financial liabilities.

By type of financial instrument, the country’s external financial liabilities were composed largely of direct and portfolio investments, particularly non-residents’ investments in equity capital (US$46.5 billion), equity securities (US$46.2 billion), debt instruments (US$31.3 billion) and debt securities (US$26.4 billion). Other external financial liabilities include other investments in the form of loans extended to residents amounting to US$40.2 billion.

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