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Net liability position improves in Q1

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BSP
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A DECLINE in liabilities, coupled with a rise in assets, caused the country’s international investment position (IIP) to improve as of March, the central bank said.

The country’s net liability position declined to $34.1 billion at end-March 2018 from $43.4 billion as of December 2017, improving by 21.3%, data released the the Bangko Sentral ng Pilipinas (BSP) on Friday showed.

The IIP takes stock of a country’s financial claims and liabilities. The quarter-on-quarter improvement logged in the first three months was on the back of a $8.1-billion or 3.8% contraction in total financial liabilities to $205.9 billion along with a slight increase in foreign assets to $171.7 billion from $170.6 billion previously.

External financial liabilities dropped because of negative revaluation adjustments in the country’s portfolio and direct investment accounts due to a decline in both the stock market and the peso — resulting in lower dollar equivalents of peso-denominated instruments. Foreign portfolio investments contracted by 7.9%, while foreign direct investments dropped 2% at end-March 2018.

About two-thirds or 65.3% of the total foreign liabilities were held by other sectors, totalling $134.5 billion at end-March. These mostly consisted of non-residents’ holdings of equity capital and debt instruments issued by local affiliates, equity securities issued by residents and loans extended by non-resident creditors.

Meanwhile, the general government’s outstanding foreign liabilities stood at $36.7 billion as of March, making up 17.8% of the total. These were comprised of debt securities held by non-residents and loans extended by non-resident creditors.

Banks’ total external liabilities amounted to $33.3 billion in the period or 16.2% of the tally.

Meanwhile, foreign assets went up 0.6% on the back of a 10.1% expansion in residents’ portfolio investments and direct investments (by 1.7%) abroad, which offset the 1.3% drop in reserve assets in the quarter.

Assets held by the BSP stood at $80.7 billion, with $80.5 billion as dollar reserves. Bank assets totalled $26.9 billion, while assets held by other sectors reached $64.2 billion.

By type of instrument, debt instruments to support intercompany lending between multinational firms and their local units accounted for 15.6% of the total liabilities, while placements in shares of stock of issued by local companies took a 12.8% share. Other assets were mostly in the form of debt

securities issued by non-residents (10.3%), residents’ deposits in banks abroad (7.7%), and loans extended to non-residents (5.4%).