PH-IIP’s net external liability rises

The Philippines’ international investment position (IIP) continued to post a net external liability of $33.8 billion as of end-June, higher than the previous quarter’s $29.2 billion due to an increase in total external financial liabilities during the period.

In the central bank’s latest quarterly IIP report, it said the net external liability position was up by $4.6 billion quarter-onquarter due to a $6.1 billion increase in total external financial liabilities during the second quarter which it said was more than the $1.5 billion increase in total external financial assets.

Data from the Bangko Sentral ng Pilipinas (BSP) showed $198.3 billion in total outstanding external financial liabilities as of end-June versus $164.5 billion worth of total outstanding external financial assets.

“Total external financial liabilities increased by 3.2 percent, surpassing the 0.9 percent growth in total external financial assets,” it said.

The IIP, a companion framework to the balance of payments statistics, continued to be in a net external liability position which means there are more foreign liabilities than foreign assets.

On a yearly basis, the end-June net external liability position dropped by 0.5 from $33.9 billion in 2016. “The slight improvement in the net IIP during the period was due mainly to the $1.8 billion expansion in external financial assets which outpaced the $1.7 billion increase in external financial liabilities,” explained the BSP.

The central bank further noted that the “growth in external financial liabilities during the quarter was due mainly to positive price revaluation of nonresidents’ holdings of domestic equity securities and equity capital. Inflows of foreign direct and portfolio investments likewise contributed to the increase in the country’s net external financial liability position.”

Foreign direct investments were up 4.9 percent while foreign portfolio investments (FPI) increased by 4.8 percent resulting to a 7.3 percent growth in the Philippine Stock Exchange Index.

“Meanwhile, the build-up in external financial assets during the quarter was driven mainly by the increase in other investments, particularly in the form of loans extended to non-residents, as well as the accumulation of the country’s reserve assets,” said the BSP.

In the report, the BSP continued to have a net external asset position while other sec- tors such as the deposit-taking corporations except the central bank, the general government, and “other sectors” – were still net users of foreign resources as they posted net external liability positions.

The BSP accounted for 49.5 percent of total external financial claims on the rest of the world with external financial assets of $81.4 billion, the bulk of which consisted of gross international reserves.

The report indicated that by type of instrument, about $81.3 billion of residents’ total external financial assets were reserve assets held by the BSP.

Direct investments in the form of debt instruments or intercompany lending, and equity capital placements in foreign affiliates accounted for 15.3 percent and 12.1 percent of total external financial assets, respectively.