THE COUNTRY’S net external liability position declined in the first quarter of 2017 despite persistent volatility on global markets, the Bangko Sentral ng Pilipinas (BSP) said on Friday.
The international investment position (IIP) narrowed, although still in a net liability position at $27.5 billion as of end-March from the $30.6 billion recorded at end-2016 following an increase in total external financial assets and a marginal decrease in external financial liabilities.
“The country’s net liability position improved notwithstanding the lingering volatility in the external environment and the uneven pace of growth in the global economy,” the BSP said in a statement.
As of the first quarter, BSP data show that total external financial assets rose 1.3% to $164.7 billion, while external financial liabilities fell 0.5% to $192.2 billion.
The IIP, which measures the stock of a country’s financial claims and liabilities, is a companion framework to a country’s balance of payments (BoP) statistics.
The BSP said external financial assets held by the Philippines increased by $2 billion from a year earlier due primarily to the $1 billion increase in direct investment, largely on account of placements of equity capital and positive price revaluation; $545 million worth of additional flows of portfolio investment which comprised mainly residents’ holdings of long-term debt securities issued by non-residents; and $369 million increase in other investments, stemming mostly from non-residents’ availment of loans from residents.
The modest decline in total external financial liabilities on the other hand was driven mainly by lower portfolio investment, particularly non-residents’ net holdings of debt securities issued by residents.
“This more than compensated for the increase in foreign direct investment (FDI) arising from non-residents’ investments in debt instruments issued by local affiliates and net equity capital inflows as well as stock price valuation adjustments, on the back of the country’s sustained positive economic performance and growth prospects,” the BSP statement read.
The central bank noted that all sectors registered improvement in their net external positions as of end-March.
The BSP’s foreign currency reserves accounted for nearly half of the country’s total external assets or 49.2%, amounting to $81.0 billion, slightly higher by $203 million than the stock recorded in end-December 2016.
By type of instrument, the central bank said 49.1% of residents’ total external financial assets were reserve assets held by the BSP.
Investment in debt instruments — or intercompany borrowings — accounted for 16.3% of the total assets, while shares of stock issued by foreign affiliate firms took an 11.9% share, the central bank said.
Investments made by foreigners in shares of stock issued by Philippine companies accounted for almost a two-thirds or 64.9% of the country’s total external obligations. This comprised mostly foreigners’ placements in equity capital in local affiliates (32.6%), equity securities issued by local corporations (32.4%), and debt instruments issued by local affiliates to foreign affiliates (18.6%).
Meanwhile, total external financial liabilities, by instrument, consisted mostly of non-residents’ holdings of equity securities issued by local corporations (26.0%), non-residents’ placements of equity capital in resident affiliates (22.7%), and residents’ availment of foreign loans (22.2%). — Imee Charlee C. Delavin
