Rise in private investments, gov’t debt spur shift in PH balance sheet
The Philippines’ total financial liabilities to the rest of the world declined sharply in the third quarter of last year as the COVID-19 pandemic continued to shift how debt is allocated and used in the various sectors of the economy.
In a statement, the Bangko Sentral ng Pilipinas (BSP) said the country’s net external liability position markedly narrowed to P140.7 billion during the July-Sept. 2020 period from the P1.5 trillion recorded in the same months of 2019.
The 90.8-percent improvement in the country’s net debtor position against the rest of the world is due to the 8-percent expansion in the domestic economy’s external financial assets to P10.8 trillion, along with the 5.2-percent contraction in its external financial liabilities to P11 trillion.
According to the report, the household sector recorded the highest net financial asset position at P9 trillion, 21.4-percent higher than the P7.4 trillion in the third quarter of 2019.
The sector’s net claims were largely against other depository corporations and other financial corporations, in the form of deposits, equity and investment fund shares and insurance, pension and standardized guarantee schemes, respectively.
The other depository corporations’ net financial asset position increased to P2 trillion, 45.8-percent higher than the P1.3 trillion recorded in the same period a year ago, due to the substantial increase in the sector’s deposits with the central bank.
The net financial asset position of both the central bank and other financial corporations declined to P681.8 billion from P697.4 billion and P176.6 billion from P709.5 billion, respectively.
More loans
Conversely, the net financial liability position of the general government sector widened to P5.4 trillion, 29.3-percent higher than the P4.1 trillion in the third quarter of 2019.
This ensued as the government issued more securities and incurred additional loans from the rest of the world to fund its COVID-19 response measures.
On the other hand, the nonfinancial corporations sector registered a lower net debtor position of P6.6 trillion from P7.6 trillion recorded in the third quarter of 2019 due to the sustained decline of their net liabilities against the rest of the world and other deposit corporations amid continued uncertainties and weak business environment.
The domestic economy’s total financial assets grew by 11.9 percent to reach P63 trillion from P56.3 trillion in the third quarter of 2019.
These assets comprised mainly of currency and deposits, loans, debt securities as well as equity and investment fund shares.
Other deposit corporations accounted for about a third of the domestic economy’s financial claims at P20.4 trillion, 8.4-percent higher than the P18.8 trillion recorded in the same period a year ago.
Their financial assets were primarily loans, which were extended mostly to nonfinancial corporations and the household sector, and currency and deposits as banks parked more of their loanable funds with the BSP amid the uncertainty caused by the pandemic.
The household sector held the second highest stock of financial assets at P14 trillion, 16-percent higher than the prior year’s P12.1 trillion, consisting mainly of currency and deposits.