PHL’s net external liability position increases to US$27.6B as of end-December 2021

The Philippines’ preliminary net international investment position (IIP) registered a net external liability position of US$27.6 billion as of end-December 2021, higher by US$5 billion than the US$22.6 billion net external liability position recorded as of end-September 2021.¹

This was on account of the 3.2 percent increase in the country’ total external financial liabilities during the quarter, which outpaced the 1.4 percent growth in total external financial assets.

As of end-December 2021, total outstanding external financial liabilities reached US$268.6 billion, while total outstanding external financial assets amounted to US$241 billion.

The country’s total external financial liabilities expanded during the quarter, following the increases recorded across all major accounts.

In particular, foreign direct investments (FDI) rose by 3.4 percent to US$110 billion largely on account of transaction inflows in the form of non-residents’ net investments in debt instruments (or intercompany borrowing) and the upward revaluation of net equity placements.²

Other investments grew by 5.2 percent to US$66.9 billion due mainly to loans availed by the resident Deposit-taking Corporations (Banks) from non-residents.³ Foreign portfolio investments (FPI) also rose by 1.7 percent to US$91.4 billion.

The upward revaluation of FDI and FPI equities reflected the rise in the Philippine Stock Exchange index (PSEi) towards the end of the quarter.⁴

Meanwhile, the growth in the country’s total external financial assets was due mainly to the increase in reserve assets and residents’ direct investments, in the form of equity capital and debt instruments.

On a year-on-year basis, the country’s net external liability position grew by 29.4 percent from US$21.3 billion in Q4 2020. This was on account of the 5.6 percent increase in total external financial liabilities, which more than offset the 3.5 percent growth in total external financial assets.

The expansion in outstanding external financial liabilities was due to the increase in the stock of FDI (by 6.4 percent from US$103.4 billion), other investments (by 9.2 percent from US$61.2 billion) and FPI (by 2.6 percent from 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) as of end-December 2021. This was followed by the Other Sectors and Banks, which accounted for 37.3 percent (US$89.8 billion) and 15.6 percent (US$37.3 billion) of the total external financial assets of the country, respectively.⁵

By type of instrument, majority of residents’ outstanding external financial assets are in the form of reserve assets held by the BSP (45.2 percent). Meanwhile, investment in debt instruments (or intercompany lending) and debt securities issued by non-residents accounted for 15.6 percent and 13.0 percent, respectively.⁶ 

The other major financial assets include equity capital (11.9 percent), net placements in foreign currency and deposits (6.8 percent), and loans (5.2 percent).

External Financial Liabilities

The Other Sectors accounted largely for the country’s total external financial liabilities with a share of 64.2 percent or equivalent to US$172.5 billion. This was followed by the NG at US$58.9 billion, comprising 21.9 percent of the country’s total external financial liabilities.

Banks accounted for 12.3 percent of the total liabilities at US$33.1 billion. The BSP held a marginal portion or 1.5 percent of the country’s total external financial liabilities at US$4 billion.

As of end-December 2021, the outstanding financial liabilities of residents to the rest of the world were comprised mainly of non-residents’ net equity capital investments in their local affiliates, (22.5 percent), loans extended to residents (20.7 percent) and net investments in debt instruments issued by their resident affiliates (18.4 percent). These were followed by foreign portfolio investments in the form of equity securities (18.0 percent) and debt securities (16.0 percent).

View Full Report: https://www.bsp.gov.ph/Media_And_Research/International%20Investment%20Position/IIP4qtr2021.pdf

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¹ The International Investment Position (IIP) is a statistical statement that shows at a point in time the value of financial assets of residents of an economy that are claims on non-residents or are gold bullion held as reserve assets and the liabilities of residents of an economy to non-residents. The difference between the assets and liabilities is the net position in the IIP and represents either a net claim on or a net liability to the rest of the world. (Source: Balance of Payments and International Investment Position Manual, 6th Edition). The current end-quarter net IIP is computed as follows: previous end-quarter net IIP plus current quarter Balance of Payments net flows & other changes (e.g., market price and exchange rate changes).

²  Debt instruments under the Direct Investment account consist mainly of intercompany borrowing/lending between direct

investors and their subsidiaries/affiliates.

³  The Central bank is excluded from the Deposit-taking Corporations Sector.

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

⁵ 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 (3) households and non-profit institutions serving households (NPISHs).

⁶ Debt securities under the Portfolio Investment account consist mainly of placements in negotiable instruments serving as evidence of a debt, which are issued by enterprises that are not affiliated with the investors.