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Inflows boost PHL net external liability position

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CONTINUED investment inflows pushed the country’s net external liability position wider in the fourth quarter of 2019, backed by optimism among foreign investors.

The country’s international investment position (IIP) stretched to a net external liability of $34.8 billion as of end-December 2019 from the $33.5 billion logged as of end-September, the Bangko Sentral ng Pilipinas (BSP) said in a statement.

On the other hand, net external liability dropped 28.3% compared to the $48.6 recorded as of end-2018.

The IIP takes stock of a country’s financial claims and liabilities.

The BSP said the 2.2% rise in total external financial liabilities to $231.9 billion — which surpassed the 1.9% growth in total external financial assets — boosted the net external liability position of the country.

“The increase in the country’s net external liability position reflected continued inflows on the back of investor confidence in the Philippine economy,” the BSP said.

The country’s total external financial liabilities rose by $5.1 billion as of end-December 2019 on a quarterly basis. This was on the back of transaction inflows, particularly in the form of foreign direct investments (FDI) in equity capital and debt instruments, coupled with positive exchange rate and other valuation adjustments, according to the central bank.

Total foreign financial assets also inched up by $3.7 billion quarter-on-quarter backed by the accumulation of reserve assets, combined with the increase in the amount of residents’ direct investments abroad.

As of end-2019, only the BSP posted a net external asset position of $86.8 billion. Other sectors including the general government and deposit-taking corporations recorded a net external liability position.

The BSP also continued to keep the largest stock of the financial assets of the Philippines at $88.1 billion or 44.7% of the total as of end-2019.

Meanwhile, other sectors held 38.5% or $75.8 billion of the country’s external financial assets. Banks held the remaining 16.8% or $33.1 billion.

According to the central bank, 44.6% of the foreign assets were reserves held by the BSP at $87.8 billion.

“Direct investments accounted for about a third of the country’s external financial assets in the form of debt instruments amounting to $32.7 billion (16.6%) and equity capital and investment fund shares totalling US$25.2 billion (12.8%),” the BSP said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the ongoing coronavirus pandemic may affect the country’s financial claims and liabilities.

“In view of COVID-19 (coronavirus disease 2019) lockdowns that led to economic contractions and risk of recession globally, foreign investments into the country could potentially slowdown amid reduction in capital expenditures by some of the biggest global companies caused by reduced economic activities,” Mr. Ricafort said in an email. — L.W.T. Noble





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