BSP-Philippines’ net foreign liability position increases to $27.6 billion at end-December 2021

?The Philippines’ the preliminary net external position (PEG) recorded a debit net external position of US$27.6 billion from end of December 2021superior of 5 billion US dollars that the US$22.6 billion Net debtor external position recorded at the end of September 2021.1.

This was due to the 3.2% increase in the country’s total external financial liabilities during the quarter, which outpaced the 1.4% growth in total external financial assets. From end of December 2021the total outstanding external financial commitments reached US$268.6 billionwhile the total stock of external financial assets amounted to 241 billion US dollars.

The country’s total external financial liabilities rose during the quarter, following increases recorded across all major accounts. In particular, foreign direct investment (FDI) increased by 3.4% for 110 billion US dollars largely due to transaction inflows in the form of net investment by nonresidents in debt securities (or inter-company borrowing) and the upward revaluation of net investment in equities2. Other investments increased by 5.2% to reach US$66.9 billion mainly due to loans contracted by resident depository corporations (banks) with nonresidents.3 Foreign portfolio investment (FPI) also increased by 1.7% to reach US$91.4 billion. The upward revaluation of FDI and REIT stocks reflects the rise in the Philippine Stock Exchange (PSEi) towards the end of the quarter.4

At the same time, the growth in the country’s total external financial assets is mainly due to the increase in reserve assets and direct investments by residents, in the form of equity and debt instruments.

On an annual basis, the country’s net external debtor position increased by 29.4% compared to US$21.3 billion in the fourth quarter of 2020. This was due to the 5.6% increase in total external financial liabilities, which more than offset the 3.5% growth in total external financial assets. The expansion of the stock of external financial liabilities is due to the increase in the stock of FDI (by 6.4% compared to US$103.4 billion), other investments (by 9.2% compared to US$61.2 billion) and REITs (by 2.6% compared to US$89.1 billion).

External financial assets

By institutional sector, the BSP continued to hold the largest share of the country’s total external financial assets at 47.2 percent (US$113.7 billion) starting the end of December 2021. Next come the other sectors and banks, which accounted for 37.3% (US$89.8 billion) and 15.6% (US$37.3 billion) of the country’s total external financial assets, respectively5.

By type of instrument, the majority of the stock of foreign financial assets of residents is in the form of reserve assets held by the BSP (45.2%). At the same time, investments in debt securities (or intercompany loans) and in debt securities issued by non-residents represented 15.6% and 13.0% respectively6. The other main financial assets include shareholders’ equity (11.9%), net foreign currency investments and deposits. (6.8%) and loans (5.2%).

External financial liabilities

The other sectors accounted for a large part of the country’s total external financial liabilities with a share of 64.2% or the equivalent of US$172.5 billion. This was followed by the NG to US$58.9 billion, representing 21.9% of the country’s total external financial liabilities. Banks accounted for 12.3% of total liabilities as of US$33.1 billion. The BSP held a marginal share or 1.5% of the country’s total external financial liabilities at 4 billion US dollars.

From end of December 2021, the outstanding financial liabilities of residents to the rest of the world consisted mainly of net capital investments by non-residents in their local subsidiaries (22.5%), loans granted to residents (20.7%) and net investments in debt securities issued by their resident subsidiaries (18.4%). This is followed by foreign portfolio investments in the form of equity securities (18.0%) and debt securities (16.0%).

1 The international investment position (IEP) is a statistical statement which indicates at a given time the value of the financial assets of the residents of an economy which are claims on non-residents or gold bullion held as assets reserve and the liabilities of the residents of an economy. an economy to non-residents. The difference between assets and liabilities is the net position in the IIP and represents either a net claim or a net liability vis-à-vis the rest of the world. (Source: Balance of Payments and International Investment Position Manual, 6th edition). The net IIP at the end of the current quarter is calculated as follows: Net IIP at the end of the previous quarter plus net flows of the balance of payments of the current quarter and other variations (for example, market price and exchange rate variations ).

2 Debt securities under the direct investment account consists primarily of intercompany borrowings/lending between direct investors and their subsidiaries/affiliates.

3 The Central Bank is excluded from the depository corporations sector.

4 The PSEi increased by 169.75 basis points, from 6,952.88 to end of September 2021 at 7,122.63 au end of December 2021.

5 Other sectors cover the following economic sectors: (a) other financial corporations, which include private and public insurance companies, holding companies, public financial institutions, investment companies, other financial intermediaries except insurance, institutions/trust companies, finance companies, stockbrokers/brokers, investor lender, licensed agent banks (AAB), foreign exchange firms, investment houses, pawnbrokers, card companies credit, offshore banking units (OBU); (b) non-financial corporations, which refer to public and private corporations and quasi-corporations whose main activity is the production of market goods or non-financial services; and (3) households and nonprofit institutions serving households (NPISH).

6 Debt securities under the Portfolio investment primarily consist of investments in marketable securities representing debt, which are issued by companies unrelated to the investors.

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Shirlene J. Manley