PHL’s net external liability position rises to US$31.6 billion as of end-March 2022

The country’s net international investment position (IIP) registered a net liability position of US$31.6 billion as of end-March 2022, which is 14.4 percent higher than the US$27.6 billion recorded in end-December 2021.^[1]

This stemmed from the decline in total external financial assets by 1.1 percent, coupled with the increase in total external financial liabilities by 0.5 percent.

As of end-March 2022, total outstanding external financial assets amounted to US$238.4 billion, while total outstanding external financial liabilities totaled US$269.9 billion.

The quarter-on-quarter contraction in the country’s total stock of external financial assets was due primarily to the decline in other investments by 7.0 percent (from US$30.5 billion to US$28.4 billion), resulting from residents’ net withdrawal of their currency and deposits in foreign banks and net repayment of loans by non-resident debtors.

In addition, the decrease in reserve assets by 1.4 percent from US$108.8 billion to US$107.3 billion as of end-March 2022 due mainly to valuation adjustments also contributed to the lower total outstanding external financial assets of the country during the review period.

Meanwhile, the slight increase in the Philippines’ total stock of external financial liabilities during the quarter was due to the expansion in other investments by 3.3 percent from US$66.9 billion to US$69.1 billion, following the increase in outstanding loans extended by non-resident creditors.

Further, the rise in foreign direct investments (FDI) by 1.8 percent from US$110 billion to US$112 billion on account of the upturn in net investments in debt instruments also supported the increase in the total outstanding external financial liabilities.^[2]

However, the uptick in the country’s total outstanding external financial liabilities was muted partly by the 3.0 percent drop (from US$91.4 billion to US$88.6 billion) in foreign portfolio investments (FPI) due to revaluation losses.^[3]

On a year-on-year basis, the country’s net liability position increased by 94.8 percent (from US$16.2 billion) as total outstanding liabilities for the period increased by 9.8 percent (from US$245.9 billion), which outpaced the 3.8 percent growth in the total stock of financial asset (from US$229.7 billion).

The surge in total external financial liabilities stemmed mainly from the growth in outstanding FDI in the form of debt instruments, foreign loans availed by residents, and non-residents’ holdings of equity securities issued by residents.

EXTERNAL FINANCIAL ASSETS

The Bangko Sentral ng Pilipinas (BSP) continued to account for the largest share of the country’s total stock of external financial claims on the rest of the world at 47.0 percent, or equivalent to US$111.9 billion.

This was followed by the Other Sectors and Banks, which accounted for 37.5 percent (US$89.4 billion) and 15.5 percent (US$37 billion) of the total external financial assets of the country, respectively.^[4]

By type of instrument, majority of the country’s stock of external financial assets was in the form of reserve assets of the BSP at 45.0 percent. Other major types of external financial assets include investments in debt instruments issued by foreign affiliates (or intercompany loans) (16.0 percent), debt securities issued by non-residents (13.4 percent), equity capital (11.8 percent), currency and deposits (6.3 percent) and loans extended to non-residents (4.9 percent).^[5]

EXTERNAL FINANCIAL LIABILITIES

The Other Sectors’ total external financial liabilities reached US$173.3 billion as of end-March 2022, which accounted for the largest share or 64.2 percent of the country’s outstanding external financial liabilities.

This was followed by the National Government (NG) at US$61.4 billion, comprising 22.7 percent of the country’s total external financial liabilities. Banks accounted for 11.6 percent of the total liabilities at US$31.3 billion.

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

Outstanding external financial liabilities of residents to the rest of the world were largely in the form of FDI in equity capital (22.3 percent) and debt instruments (19.2 percent); loans from non-resident creditors (21.1 percent); and FPI in equity securities (16.9 percent) and debt securities (16.0 percent).

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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 and 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 downward revaluation in equity securities mirrored the drop in Philippine Stock Exchange index (PSEi) from 7180.73 to 7118.57 in Q1 2022.

^[4] 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).

^[5] 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.