Philippine international investment position improves in Q1 on lower debt

MANILA, Philippines — The country’s international investment position (IIP) continued to improve in the first quarter of the year amid the contraction in total financial liabilities, a report released by the Bangko Sentral ng Pilipinas (BSP) showed.

The central bank said preliminary IIP data showed that the country’s net external liability position declined 21.3 percent to $34.1 billion in end-March from $43.4 billion at end-December 2017.

This developed as total external financial assets improved marginally to $171.7 billion from $170.6 billion, while total financial liabilities declined 3.8 percent to $205.9 billion from $214 billion.

IIP is a stock estimate of the country’s foreign financial assets and foreign financial liabilities outstanding as of a certain period, while balance of payments is a summary of the economic transactions of the country with the rest of the world.

The modest increase in total external financial assets was driven mainly by the 10.1 percent increase in residents’ portfolio investments and the 1.3 percent rise in direct investments abroad, offsetting the 1.3 percent decline in reserve assets.

The country’s external financial liabilities fell 3.8 percent as of end-March, stemming mainly from negative revaluation adjustments in the portfolio and direct investment accounts.

Foreign portfolio investments contracted 7.9 percent, while foreign direct investments declined two percent.

“The revaluation adjustments reflected the 6.8 percent quarter-on-quarter dip in the Philippine Stock Exchange index (PSEi) as well as the continued depreciation of the Philippine peso against the US dollar, resulting in lower US dollar equivalents of peso-denominated instruments,” the central bank said.

The country’s net external liability position as of end-March was 14.9 percent higher compared to the $29.7 billion booked in end-March last year as total external liabilities grew by 6.9 percent and exceeded the 5.5 percent growth in total external assets.

“The hefty accumulation of external liabilities was driven by the combined impact of investment inflows and positive revaluation adjustments, particularly in the foreign direct investments and foreign portfolio investments,” the BSP said.

“The positive revaluation was reflective of the 9.1 percent increase in the PSEi from 7,311.72 level as of end-March 2017,” it said.

Across sectors, only the BSP remained as the sole net lender of resources to the rest of the world as of end-March.

Meanwhile, BSP Governor Nestor Espenilla Jr. said foreign currency loans extended by Philippine banks climbed 6.4 percent to $16.4 billion in end-March from $15.4 billion in end-December.

Espenilla said the mix of the outstanding loans granted by foreign currency deposit units (FCDUs) of banks remained biased towards medium- to long-term debt, or those payable over a term of more than one year, cornering 74.2 percent of total.