PH external exposure improves

Published July 8, 2021, 5:52 PM

by Lee C. Chipongian

The central bank said the country’s net external liability position improved by 53.1 percent year-on-year to P915 billion in the last quarter of 2020 versus P1.9 trillion same period in 2019, based on the latest Balance Sheet Approach (BSA) which is a report useful in detecting financial crisis especially from asset-liability mismatches.

The Bangko Sentral ng Pilipinas (BSP) said in a statement Thursday that the external exposure was cut by more than a half due to the increase in the BSP’s net foreign claims and the decline in the net liabilities of non-financial corporations (NFCs). This improved the country’s net debtor position against the rest of the world (ROW). It also noted a reversal of the other depository corporations’ (ODCs) position as net external creditor despite the “sharp increase in the General Government’s (GG) net liabilities with the ROW.”

By sector, the BSA report said the households (HH) and the financial sector comprising of the BSP, the ODCs, and other financial corporations (OFCs) remained net creditors while NFCs and the GG continued to be net debtors.

By definition, the BSA which is now a quarterly report, represents the country’s financial balance sheets on a from whom-to-whom basis. The BSA is an International Monetary Fund financial stability surveillance tool to “better monitor the potential vulnerabilities of economic sectors and their relationships with one another” and “in identifying the possible emergence of a financial crisis, specifically those arising from asset-liability mismatches and increasing balance sheet interlinkages.”

The BSP said NFCs’ fourth quarter 2020 overall net financial liability position of P7.5 trillion was lower than P8.1 trillion in 2019. “This ensued as the NFC’s net liabilities against the ODCs eased by 26.5 percent to P1.6 trillion from P2.2 trillion, as claims (deposits) on the ODCs rose by 13.7 percent,” said the BSP.

As for NFC’s gross liabilities with the ODCs, this amounted to P6.7 trillion “as banks continued to be risk averse, limiting the access of NFCs to credit.”

The NFCs’ net external liability position also fell to P3.3 trillion from P3.6 trillion same time in 2019 because of the expansion in its holdings of equity and debt securities issued by the ROW and the rise in the NFCs’ lending to its related parties abroad, said the BSP.

The HHs, in the meantime, registered a higher net financial asset position of P9.5 trillion in the last quarter of 2020 versus P8.1 trillion in 2019, mainly on account of higher net financial claims against the ODCs and OFCs, said the BSP.

The ODCs’ overall net financial asset position, on the other hand, increased by 50.9 percent to P2 trillion from P1.3 trillion same period in 2019.

The BSP also reported that the Central Bank’s (CB) net claims on the ROW increased by 20.5 percent year-onyear to P5.3 trillion while the GG’s net liability position also went up by 31 percent to P5.9 trillion.