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2017 Flow of Funds Reports Higher Saving and Real Investments by the Domestic Economy

03.08.2019

The domestic economy generated saving of ₱3,862.8 billion in 2017, 11.1 percent higher than the year ago level, despite external risks at that time. All sectors were savers during the period led by the non-financial corporations sector at ₱2,241.3 billion, driven by profitable business operations and expansion activities. The general government sector recorded the second largest saving at ₱649.8 billion, following improved tax revenue collections of the National Government (NG) and local government units (LGUs). The household and financial corporations sectors posted saving of ₱636.1 billion and ₱335.5 billion, respectively.

Real investments of the domestic economy continued to grow, albeit at a slower pace of 12.4 percent, amounting to ₱3,972.4 billion. Except for the financial corporations sector, all other sectors expanded their real investments. The non-financial corporations sector was the largest investor at ₱2,272.2 billion, following the increased demand for institutional and agricultural structures as well as the continued construction of power supply facilities and equipment, and irrigation projects. The general government sector’s capital accumulation reached ₱897.4 billion as the NG sustained its infrastructure spending. The household sector accumulated ₱784.4 billion in real investments. Conversely, the financial corporations sector’s capital formation contracted to ₱18.4 billion, following the disposal of real and other properties acquired (ROPA) by government financial institutions (GFIs) and mergers and consolidation in the banking system.

The domestic economy’s net borrowing from the rest of the world (ROW) more than doubled at ₱106.8 billion in 2017. The domestic economy’s robust real investment activity widened the country’s saving-investment deficit, resulting in higher borrowings from rest of the world. All sectors were net borrowers, except for the financial corporations sector increased its net lending during the period to ₱317.2 billion. In contrast, the non-financial corporations sector reversed to a net borrower at ₱29.8 billion, using loans and equity securities to finance most of its funding requirements. The household sector’s net borrowing surged to ₱153.7 billion, while the general government sector’s net borrowing decreased to ₱240.5 billion.

Loans and currency and deposits were the most widely used financial instruments in the economy at ₱1,747.5 billion and ₱1,232.7 billion, respectively. Loans expanded by 18.7 percent, driven by the loan availment of non-financial corporations and household sectors from the financial system to finance the robust expansion in real investments amid the low interest rate environment. Currency and deposits remained a key instrument in carrying out financial transactions, despite its substantial decline due to the withdrawal of OFCs’ deposits with the BSP as well as the BSP’s foreign exchange operations.

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