THE PHILIPPINES became a net borrower in 2016 as investments surged by double digits, outpacing a pickup in savings amid aggressive spending by the government for infrastructure and also spending by households, the central bank said.
“The domestic economy ends its 13-year streak of net lending to the rest of the world (ROW) and becomes a net borrower in 2016,” the Bangko Sentral ng Pilipinas (BSP) said in its latest Flow of Funds report published over the weekend.
All sectors — financial firms, non-financial corporations, the general government, and households — generated savings during the year worth P3.46 trillion, 9.7% higher than the P3.155 billion tallied in 2015. Philippine companies made P2.021 trillion in aggregate savings, supported by high profits especially for manufacturing, construction, and service-oriented industries.
“Developments in the domestic front supported the broad-based expansion in saving, particularly, favorable labor market conditions, steady inflows of Overseas Filipinos’ remittances, improved tax revenue collections, and profitable business operations,” the report read.
Meanwhile, Filipino consumers also made P614.5 billion to post a slight dip from the previous year as household spending outpaced income growth, the central bank said.
The general government also yielded P582.1-billion savings as tax collections of local government units “improved.” Banks generated P242.7 billion savings in 2016 from bigger interest incomes on the back of “intensified lending activities.”
On the other hand, real investment surged by 24.4% year on year to P3.516 trillion which was higher than savings, largely due to capital accumulation led by local corporates and the government.
“This is in light of heightened construction activities and significant importation of capital goods in the telecommunications, power, and transportation industries during the year, the central bank said, adding that “aggressive spending on infrastructure projects and modernization of the country’s defense system” boosted state spending.
Government spending amounted to P2.549 trillion in 2016, up 14.3% from a year earlier although short of a P2.646-trillion program, according to the Bureau of the Treasury. The stronger spending helped boost economic growth to 6.9% in 2016, faster than 2015’s 5.9% pace.
These developments drove the Philippine economy to become a net global borrower, as it sought additional funds beyond the cash available onshore.
The government was a net borrower of P261.6 billion that year as it sourced funding from currency and deposit withdrawals, the issuance of debt papers, and loans.
“[T]he low interest-rate environment, market volatility, and dynamic real investment activities stimulated the demand for loans from the financial system,” the BSP also noted, with loan transactions rising by 30.4% to reach P1.557 trillion.
The Philippines borrows from both local and external sources to help fund its budget deficit and support a growing economy, particularly to support the ambitious P8.44-trillion infrastructure spending plan of the Duterte administration until 2022. — Melissa Luz T. Lopez
