IIP posts higher net liability of $15B in Q2 – BSP

Published October 1, 2020, 6:00 AM

by Lee C. Chipongian

The country’s international investment position (IIP) registered a higher net liability position of $15 billion in the second quarter or up by 45.5 percent compared to $10.3 billion in the first quarter this year, the Bangko Sentral ng Pilipinas (BSP) said.

The BSP said this is because the total external financial liabilities increased at a faster pace of 6.7 percent compared to the 4.7 percent growth in the external financial assets side.

The IIP which shows the value of financial assets of residents of an economy that are claims on non-residents, on a year-on-year basis posted lower net external liability position or down by 62.5 percent as of end-second quarter from $40 billion same time last year. This is from the lower outstanding level of non-residents’ investments in equity securities issued by local corporates and banks, according to the BSP, “on account of the decline in the prices of these instruments as investors sold their equity holdings due to the uncertainties surrounding the ongoing COVID-19 pandemic. The hefty build-up in the country’s international reserves also contributed to the decrease in the country’s net external liability position.”

On a quarterly basis, the total external financial liabilities rose to $223.7 billion in the second quarter versus $209.6 billion in the first quarter. The higher external financial liabilities expanded due to foreign direct investment inflows and government borrowings such as debt issuances and loans to finance anti-pandemic response.

The BSP also said that the “upward revaluation” of non-residents’ equity securities holdings “reflected the appreciation of the local currency and the rebound in the Philippine Stock Exchange Index (PSEi), following the gradual reopening of businesses after two months of lockdown” beginning in June. The PSEi as of end-June was higher than end-March while the peso appreciated by 2.4 percent in the second quarter from the first quarter.

The BSP said the total external financial assets increased from $199.3 billion to $208.7 billion and this was “due mainly to positive revaluation adjustments in residents’ equity investments abroad, reflecting to some degree a recovery in the global financial markets. In addition, the continuous accumulation of the country’s gross international reserves contributed to a higher stock of external assets.”