PH external investment liability up 8.3% in Q2

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THE Philippines’ international investment position (IIP) showed a net liability of $48.2 billion in the second quarter of the year, up 8.31 percent from the previous quarter, preliminary data from the central bank showed on Wednesday.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said the net liability rose by $3.8 billion from the first-quarter level of $44.5 billion.

The country’s total outstanding external financial liabilities topped $187.1 billion at end-June, increasing by $7.7 billion from $179.5 billion as of end-March 2014. On the other hand, total outstanding external financial assets reached $138.9 billion, up from the previous $135 billion, according to the BSP data.

The increase of $7.7 billion in total external financial liabilities exceeded the rise of $3.9 billion in total external financial assets, the BSP said.


The BSP gave no comparative figures for the year earlier, but records as of end-December 2013 showed the country had a lower net liability then of $40.7 billion.

The IIP is a companion framework to the balance of payments (BOP) statistics. Compared with the BOP, which is a statistical statement that records the country’s transactions or flows with the rest of the world for a given period, the IIP summarizes the country’s stock of financial claims on and financial liabilities to the rest of the world.

Similar to the BOP’s financial account, the assets and liabilities in the IIP are classified as direct investments, portfolio investments, financial derivatives, and other investments.

BSP largest asset holder
The BSP held the largest share of the country’s total financial assets amounting to $81.2 billion, or 58.4 percent. The other sectors accounted for 27.6 percent at $38.4 billion, mainly in the form of residents’ direct investments abroad. Deposit-taking corporations held 13.9 percent at $19.3 billion, and the general government maintained its total external financial asset holdings at nil.

Meanwhile, the BSP data showed that the other sectors continued to hold the majority of residents’ total liabilities to non-residents, a 63.6 percent share comprising mainly foreign direct investments and portfolio investments.

The general government recorded $37.3 billion in external liabilities (19.9 percent of the total), which consisted of debt securities and loans. Total external liabilities of deposit-taking corporations amounted to $29.3 billion (15.4 percent), mostly in the form of loans, equity securities, and non-residents’ deposits in domestic banks.

A positive view
An analyst sees a positive sign from the higher external financial liability of the Philippines. Justino Calaycay, analyst at Accord Capital Equities Corp. said the higher liabilities actually support the view that the country continues to be an attractive “parking area” for foreign-managed funds.

“As the reports bear out, the bulk of the increase was largely attributable to higher foreign direct investments and non-residents’ holdings of equity securities. This is a vote of confidence in the strong underlying fundamentals of the macro-economy even amid the tough challenges being faced by the United States, Europe and China,” he said.

According to the data, only the BSP recorded a net external asset position as of end-June 2014 as deposit-taking corporations (or banks), general government, and ‘other sectors’ were net users of foreign resources, posting higher net external liability positions.

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