The Philippines’ international investment position (IIP) in 2020 improved to a net external liability of $20.2 billion, the Bangko Sentral ng Pilipinas (BSP) said.

According to the BSP, the 2020 IIP external liability translates to a 47.9 percent improvement from the 2019 liability of $38.8 billion. 

The IIP is a statistical record that summarizes a country’s financial claims on and financial liabilities to the rest of the world as of a specific time. The net IIP is the difference between a nation's stock of foreign assets and a foreigner's stock of that nation's assets. The IIP is also a companion data to the balance of payments statistics. The BOP records the country’s transactions or flows with the rest of the world for a given period.

The growth in financial assets, specifically from the BSP’s buffer fund, helped bring down the net external liability position on a year-on-year basis.

Compared to the previous quarter’s $10.6 billion (end-September 2020), the net external liability position went up by 90.3 percent.

On a year-on-year basis the net external liability position decreased due to the growth in the external financial assets of 19.6 percent which was more than the growth in external financial liabilities of 8.4 percent.

The BSP led the expansion in external financial assets last year, followed by “other sectors” and deposit-taking corporations. These “other sectors” are private non-banks and public corporation and includes other financial corporations, non-financial corporations, and households and non-profit institutions serving households.

In the meantime the external financial liabilities increased by 8.4 percent year-on-year due primarily to the National Government’s (NG) foreign borrowings via issuance of debt securities and other foreign loans.

On a quarter-on-quarter basis, the latest IIP report showed that the 90.3 percent increase in the net external liability position resulted from the 10.6 percent increase in the country’s total external financial liabilities to $254 billion from $229.7 billion, which outpaced the 6.8 percent expansion in total external financial assets to $233.9 billion from $219.1 billion, noted the BSP.

External financial liabilities all went up during the period such as foreign portfolio investments (FPI) which increased by 18.9 percent to $88.9 billion due to NG bond sale and strong investor interest despite the pandemic. Foreign direct investments (FDI) also went up by 7.1 percent to $103.2 billion.

According to the BSP, the positive revaluation adjustments in FPI and FDI were seen in the peso appreciation and the moderate rebound in the trading of listed shares during the months of October to December last year. Sentiments improved with the gradual reopening of the economy and the start of the COVID-19 vaccine rollout around the world.

As for external financial assets growth, this came from the 9.6 percent increase in international reserve assets which hit more than $110 billion at the end of 2020. The BSP said the 5.3 percent increase in residents’ direct investments to $64 billion and the 4.7 percent increase in portfolio investments to $29.1 billion also boosted financial assets.

The BSP has 47.9 percent of the country’s total external financial assets or $112 billion as of end-December 2020. The other sectors accounted for 36 percent or $84.3 billion while 16.1 percent or $37.6 billion are held by banks.

By type of instruments, the BSP’s reserve assets of over $110.1 billion is 47.1 percent of the country’s total external financial assets, followed by residents’ direct investments in debt instruments and equity capital at 15.5 percent, and  investment fund shares at 11.8 percent of the total external financial assets. 

About 11.4 percent are residents’ holdings of portfolio debt securities issued by non-residents, 7.4 percent are foreign currency and deposits, and 4.9 percent are loans extended to non-residents.

The other sectors have the biggest share of total external financial liabilities at 63.8 percent or $162.1 billion as of end-December 2020, while the general government accounted for 22.2 percent or $56.3 billion. Banks’ outstanding external liabilities accounted for 13.5 percent or $34.2 billion while the BSP only had 0.5 percent or $1.34 billion.