Philippine international investment position weakens

MANILA, Philippines — The country’s international investment position (IIP) at the end of last year  continued to weaken as its net liability position increased during the period, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

According to preliminary IIP data, the country’s net external liability position grew 22.25 percent to $43.4 billion at end December 2017 from its end-September level of $35.5 billion.

The BSP said this stemmed from the 5.7 percent increase in external financial liabilities, which amounted to $214 billion in end–December. This outpaced the 2.2 percent growth in external financial assets, which reached $170.6 billion.

IIP is a stock estimate of the country’s foreign financial assets and foreign financial liabilities outstanding as of a certain period.

According to the BSP, the growth in external financial liabilities during the quarter can be attributed to the expansion in foreign portfolio investments (FPIs), which resulted from the combined effects of price adjustments and the 4.7 percent growth in the Philippine Stock Exchange index to 8,558.42 at the end of the year.

The central bank said this was also brought about by the increase in foreign direct investments (FDIs) on the back of investor confidence on the country’s sound macroeconomic fundamentals and growth prospects.

“Moreover, the appreciation of the Philippine peso against the US dollar contributed partly to the overall increase in the country’s external financial liabilities as peso-denominated instruments posted higher US dollar equivalent,” the BSP added.

Meanwhile, the improvement in the country’s external financial assets was attributed to the growth in residents’ direct and portfolio investments abroad, as well as the accumulation in the country’s reserve assets.

On a year-on-year basis, the BSP said the country’s net external liability position was higher by 55 percent than the previous year’s level of $28 billion.

The central bank attributed this to the 13.1 percent increase in external financial liabilities, which outperformed the 5.8 percent increase in external financial assets.

External financial liabilities, for its part, grew largely due to the influx of FDIs, which recorded an all-time high of $10 billion in 2017, the BSP said.

“Likewise, the hefty accumulation of FPI, particularly non-residents’ holdings of equity securities that were issued by residents, contributed to the rise in liabilities. The 25.1 percent increase in the PSEi from the 6,840.63 level as of end-2016 reflected the growth in stock prices and the expansion in FPI during the period,” the BSP said.

Across sectors, the BSP said it has remained the sole net lender of resources to the rest of the world with a net asset position of $80.4 billion as of end-December.

By contrast, the other major sectors remained net borrowers of foreign resources.

About 47.9 percent of the country’s total external financial assets were held by the BSP, while 15.5 percent are in banks. The remaining 36.6 percent are in other sectors.

Meanwhile, 65.5 percent of the country’s external financial liabilities are in other sectors. About 17 percent comprise of the general government’s external liabilities, while the remaining 16.8 percent were held by banks.