• PH foreign investment position up, debt down

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    The Philippines’ international investment position (IIP) has improved as of end-March, with the expansion in the country’s total external financial assets accelerating amid a drop in total external financial liabilities, the Bangko Sentral ng Pilipinas (BSP) said on Friday.

    The IIP is used as an accompanying framework for the country’s balance of payments (BOP) statistics.
    Although the absolute level of the country’s financial assets at $164.70 billion remained below that of external liabilities at $192.24 billion during the period, the result was a drop in net external liabilities to $27.53 billion as of end-March.

    That reflects a 10 percent decline from net external liabilities of $30.59 billion at end-December 2016, and a 9.6 percent improvement from liabilities of $30.46 billion recorded as of end-March 2016.

    “The country’s net liability position improved, notwithstanding the lingering volatility in the external environment and the uneven pace of growth in the global economy,” the central bank said in a statement.
    Financial assets during the quarter grew 1.3 percent, or by $2 billion, as the country’s direct investments showed a build-up due primarily to the $1-billion increase in direct investments, largely on account of placements of equity capital and positive price revaluation. The build-up was also due to $545 million in additional flows of portfolio investment, which comprised mainly of residents’ holdings of long-term debt securities issued by non-residents, a $369-million increase in other investments, stemming mostly from non-residents’ availment of loans from residents, the BSP said.

    The modest 0.5 percent decline in total external financial liabilities was driven mainly by lower portfolio investments, particularly non-residents’ net holdings of debt securities issued by residents, the Bangko Sentral said.

    “This more than compensated for the increase in foreign direct investments arising from non-residents’ investments in debt instruments issued by local affiliates and net equity capital inflows, as well as stock price valuation adjustments, on the back of the country’s sustained positive economic performance and growth prospects,” it added.

    Under the IIP account, investments in the country are considered liabilities given that foreigners own the funds and they are assumed to eventually cash in on gains and pull their money out the country.

    Compared with accounts under the country’s overall balance of payments, 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.|

    But similar to the payments balance’s financial accounts, assets and liabilities in the IIP are classified as direct investments, portfolio investments, financial derivatives, and other investments.

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