PH external exposures up at P1.3 T

Published July 3, 2022, 8:10 PM

by Lee C. Chipongian

Philippines’ net external liability position expanded to P1.3 trillion in 2021, up by 34.8 percent from P971 billion in 2020, based on the latest central bank Balance Sheet Approach (BSA) report which is a financial stability monitoring tool.

The Bangko Sentral ng Pilipinas’ (BSP) BSA report covers the national government (NG), households, production-based institutions, all banks and non-banks, insurance firms, money-market companies and the BSP itself.

The BSA report is basically a presentation of the country’s sectoral accounts on a from whom-to-whom basis. It is developed by the International Monetary Fund and is considered by the BSP as mainly a financial stability surveillance tool to “better monitor the potential vulnerabilities of economic sectors and their relationships with one another.”

Based on the latest but preliminary 2021 fourth quarter BSA, the increase in net external liability was driven by the growth of the net external liability positions of the non-financial corporations (NFCs) and the general government (GG).

NFCs, which are both public and private institutional units engaged in the production of market goods and non-financial services, posted a net debtor position of P8.2 trillion end-2021, up by 7.9 percent from P7.6 trillion same period in 2020.

The GG reported a net financial liability position of P6.9 trillion last year, higher than P5.8 trillion in 2020 due to government borrowings. GG includes the NG and other extra-budgetary units such as local government units and social security funds.

The BSP said NFCs continued to post higher net borrowings from the rest of the world and other financial corporations which are insurance corporations, holding companies, and government financial institutions.

The GG’s net financial liability position also widened. This was because the NG borrowed heavily from both domestic and foreign sources to fund its socio-economic recovery programs to fight the “extensive negative effects” of the still ongoing pandemic, said the BSP.

Meanwhile, the BSP said households (HHs) remain as the country’s highest net creditor at P10.5 trillion. This was 10.6 percent higher than the P9.5 trillion same period in 2020.

The HHs also showed improvements in savings and investments such as: increase in deposits with other depository corporations (ODCs); expansion in the HHs’ holdings of equity and investment fund shares issued by other financial corporations; increase in the insurance, pension and standardized guarantee schemes attributed to HHs; and buildup of domestic currency holdings.

The BSP also noted ODCs’ improved net creditor position due to the increase in its net financial assets with the GG and non-residents. The BSP’s net creditor position likewise expanded because of higher net external assets.

The ODCs are banks and non-banks, non-stock savings and loan associations, money market funds and offshore banking units. Last year, ODCs’ net creditor position rose by 9.1 percent to P2.2 trillion from P2 trillion.

The BSP’s net creditor position, meantime, also expanded by 13.7 percent to P771.3 billion in 2021 from P678.5 billion.