The country’s net international investment position (IIP) recorded a $27.6 billion net external liability as of end December 2021, up by $5 billion from the $22.6 billion in the previous quarter ending in September, said the Bangko Sentral ng Pilipinas (BSP).
On a year-on-year basis, Philippines’ net external liability position increased by 29.4 percent from $21.3 billion in 2020.
The IIP, as defined by the BSP using International Monetary Fund (IMF) description, is a statistical statement that shows at a point in time the value of financial assets of residents of an economy that are claims on non-residents or are gold bullion held as reserve assets and the liabilities of residents of an economy to non-residents. The difference between the assets and liabilities is the net position in the IIP which represents either a net claim on or a net liability to the rest of the world.
The BSP said the higher net external liability position in the last quarter of 2021 versus the third quarter last year was due to a 3.2 percent increase in the total external financial liabilities which it said outpaced the 1.4 percent growth in total external financial assets.
Last year, the total outstanding external financial liabilities stood at $268.6 billion while the total outstanding external financial assets was at $241 billion.
The BSP said total external financial liabilities expanded in the fourth quarter because foreign direct investments which grew by 3.4 percent to $110 billion from the transaction inflows of non-residents’ net investments in debt instruments or intercompany borrowing, and the upward revaluation of net equity placements. Other investments also increased by 5.2 percent to $66.9 billion due to loans availed by the resident deposit-taking corporations from non-residents.
As for the growth in the country's total external financial assets, the central bank noted that this was due mainly to the increase in reserve assets and residents' direct investments, in the form of equity capital and debt instruments.
“By institutional sector, the BSP continued to hold the largest share of the country’s total external financial assets at 47.2 percent ($113.7 billion) as of end-December 2021. This was followed by the ‘other sectors’ and banks, which accounted for 37.3 percent ($89.8 billion) and 15.6 percent ($37.3 billion) of the total external financial assets of the country, respectively,” said the BSP.
The other sectors or other economic sectors are private and public insurance corporations, holding companies, government financial institutions, investment companies, other financial intermediaries except insurance, trust institutions/corporations, financing companies, securities dealers/brokers, lending investor, among others.
By type of instrument, the BSP said about 45.2 percent of residents’ outstanding external financial assets are mostly reserve assets held by the BSP. Investment in debt instruments or intercompany lending accounted for 15.6 percent while debt securities issued by non-residents accounted 13 percent.
About 64.2 percent or $172.5 billion of the total external financial liabilities are from the other sectors. The National Government, on the other hand, accounted for $58.9 billion or 21.9 percent of the total external financial liabilities.
Banks accounted for 12.3 percent of the total liabilities at $33.1 billion while the BSP “held a marginal portion” of 1.5 percent at $4 billion.