The country’s net external liability, or its debtor position, versus the rest of the world (ROW) has dropped to P140.7 billion as of end-third quarter 2020, a huge decline from same time in 2019 of P1.5 trillion, based on the central bank’s latest Balance Sheet Approach (BSA) report.

The Bangko Sentral ng Pilipinas (BSP) said the 90.8 percent decline – which is considered an improvement -- in the net debtor position against the ROW is because of the eight percent expansion in the domestic economy’s external financial assets to P10.8 trillion from P10 trillion previously.

The 5.2 percent contraction in the country’s external financial liabilities to P11 trillion from P11.6 trillion also contributed to the overall decline to net external liability.

The financial corporations sector contributed the most in the improvement of the economy’s net debtor position, based on the BSA.

In the meantime the household sector’s net financial asset position increased as growth in financial assets dominated that of its liabilities. The households are institutional units consisting of one individual or a group of individuals.

The household sector had the highest net financial asset position at P9 trillion, up by 21.4 percent year-on-year.  The BSP said its net claims were on other depository corporations (ODCs) and other financial corporations (OFCs) as deposits, equity and investment fund shares and insurance, pension, and standardized guarantee schemes.

The ODCs’ net financial asset position went up by 45.8 percent to P2 trillion because of the substantial increase in the sector’s deposits with the central bank.

The BSP said that the net financial asset position of both the central bank and OFCs declined to P681.8 billion from P697.4 billion, and P176.6 billion from P709.5 billion, respectively. As for the net financial liability position of the general government sector, this rose by 29.3 percent to P5.4 trillion from P4.1 trillion in 2019.

 “This ensued as the government issued more government securities and incurred additional loans from the ROW to fund its COVID-19 response measures,” said the BSP.

The BSA also noted that the domestic economy’s total financial assets grew by 11.9 percent to P63 trillion in the third quarter 2020 from P56.3 trillion previously.

In the same period, the economy’s financial liabilities increased by 9.2 percent to P63.2 trillion from P57.8 trillion same time in 2019.  

The BSA is developed by the International Monetary Fund in 2002 as a financial stability surveillance tool to “better monitor the potential vulnerabilities of economic sectors and their relationships with one another.”