PHL’s net external liability position as of end-September 2022 rises to US$30.1B

The country’s net international investment position (IIP) registered a net liability position of US$30.1 billion as of end-September 2022, which was 8.0 percent higher than the US$27.9 billion recorded in end-June 2022.

This development was driven mainly by the 3.5 percent contraction in the country’s total external financial assets, which outpaced the 2.3 percent decline in its total external financial liabilities.

As of end-September 2022, total outstanding external financial assets stood at US$221.5 billion, while total outstanding external financial liabilities amounted to US$251.6 billion.

The contraction in the country’s stock of external financial assets quarter-on-quarter was attributed primarily to the decline in reserve assets held by the Bangko Sentral ng Pilipinas (BSP) and other investments.

In particular, reserve assets decreased by 7.8 percent (from US$100.9 billion to US$93.0 billion) due to the BSP’s net foreign exchange operations, downward valuation adjustments in foreign currency-denominated reserves (or non-gold reserves), and the National Government’s (NG) payments of its foreign currency debt obligations.

Other investments fell by 1.8 percent (from US$27.9 billion to US$27.3 billion) following the decline in residents’ holdings of currency and deposits.

Meanwhile, the decrease in the stock of the country’s external financial liabilities during the quarter was mainly on account of the 7.0 percent decline in foreign portfolio investments (FPI) (from US$79.6 billion to US$74.0 billion) and the 3.3 percent drop in foreign direct investments (FDI) (from US$108.2 billion to US$104.6 billion).

In particular, the outstanding value of FPI and FDI in equities declined by 12.7 percent and 8.1 percent, respectively, due mainly to downward revaluation adjustments.^[1]

On a year-on-year basis, the country’s net liability position grew by 33.0 percent from US$22.7 billion in end-September 2021.

This development was mainly attributable to the decrease in total external financial assets by 6.7 percent (from US$237.5 billion), which more than offset the decline in total external financial liabilities by 3.3 percent (from US$260.2 billion).

The contraction in the country’s external financial assets reflected the reduction in the outstanding level of reserve assets (by 12.8 percent from US$106.6 billion) due to the downward valuation adjustments in foreign currency-denominated reserves (or non-gold reserves), BSP’s net foreign exchange operations, and NG’s payments of its foreign currency debt obligations.

The drop in total external liabilities was driven mainly by the 17.7 percent decline in FPI from US$90.0 billion to US$74.0 billion due to downward revaluation of outstanding equity securities held by non-residents.

External Financial Assets

The BSP held 43.7 percent of residents’ total external financial claims, which was equivalent to US$96.9 billion as of end-September 2022. However, this level was 7.8 percent lower than its US$105.1 billion asset holdings as of end-June 2022.

The Other Sectors accounted for 40.5 percent of the country’s total stock of financial assets as of end-September 2022 at US$89.7 billion.

The remaining 15.7 percent of the country’s total external financial assets was held by Banks at US$34.9 billion.^[2]

External Financial Liabilities

The Other Sectors continued to hold most of residents’ total external liabilities, with a 61.6 percent share or equivalent to US$155.0 billion as of end-September 2022.

This level, however, was 5.4 percent lower than the outstanding liabilities recorded in the previous quarter at US$163.8 billion.

The National Government’s total external financial liabilities amounted to US$60.2 billion, which was higher by 0.2 percent than its end-June 2022 level of US$60.1 billion. The Banks accounted for 13.0 percent of the country’s total external financial liabilities totaling US$32.8 billion as of end-September 2022.

Meanwhile, the BSP held a marginal portion or 1.5 percent of the country’s total external financial liabilities at US$3.7 billion.

View Full Report here: 

https://www.bsp.gov.ph/Media_And_Research/International%20Investment%20Position/IIP3qtr2022.pdf

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^[1] The downward valuation in equities mirrored the drop in the Philippine Stock Exchange index (PSEi) from 6,155.43 in
Q2 2022 to 5,741.07 in Q3 2022. This may be attributed to the cumulative 150-bp interest rate hike of the US Federal Reserve for the period July to September 2022 to curb the further rise in inflation in the U.S.

^[2] Other Sectors cover the following economic sectors: (a) other financial corporations, which include private and public insurance corporations, holding companies, government financial institutions, investment companies, other financial intermediaries except insurance, trust institutions/corporations, financing companies, securities dealers/brokers, lending investor, Authorized Agent Banks (AAB) forex corporations, investment houses, pawnshops, credit card companies, offshore banking units (OBUs); (b) non-financial corporations, which refer to public and private corporations and quasi-corporations, whose principal activity is the production of market goods or non-financial services; and (c) households and non-profit institutions serving households (NPISHs).