The country’s net external liability position went up by 4.8 percent to P2.4 trillion in the second quarter 2023 versus P2.3 trillion in the first quarter of the same year due to the government and non-financial corporations’ (NFCs) higher indebtedness, according to the Bangko Sentral ng Pilipinas (BSP).
Based on the BSP’s latest Balance Sheet Approach (BSA) statistics released over the weekend, the higher net external liability positions of the government and NFCs which are institutional units that produce market goods and non-financial services, was partly offset by the lower net external liability position of the other financial corporations (OFCs).
The BSA, developed by the International Monetary Fund, is a financial stability monitoring tool that covers the National Government (NG), households, production-based institutions, all banks and non-banks, insurance firms, money-market companies and the BSP itself. It is a presentation of the country’s sectoral accounts on a from whom-to-whom basis.
Under the BSA report, the government is referred to as the general government or central government that covers the NG and the extra-budgetary units composed of the Philippine National Railways, the National Irrigation Administration, local government units (LGUs), and social security funds (SSFs).
The BSP noted that the NFCs and the government continued to be net debtors of the economy while households and other depository corporations (ODCs), as well as the central bank remained net creditors. ODCs are banks and non-banks with quasi-banking functions, non-stock savings and loan associations and offshore banking units.
By sector, the BSP said the NFCs continued to be the largest net debtor as its net financial liability position widened by 3.8 percent to P8.8 trillion as of end-June from P8.5 trillion.
“This resulted from the increase in the other financial corporations’ holdings of equity and investment fund shares and debt securities issued by the non-financial corporations. Further, loans from non-residents and other depository corporations increased,” said the BSP.
The OFCs which are trust entities, private and public insurance companies, government financial institutions, non-money market funds among others, reverted to a net creditor in the second quarter 2023 from its net debtor position in the previous quarter.
On a year-on-year basis, the BSP reported that the economy’s net liability position to the rest of the world (ROW) increased by 79.5 percent to P2.4 trillion from P1.3 trillion.
The increase is attributed to the higher net external liabilities of the government and the NFCs, and the contraction in the net external assets of the ODCs.
As of the second quarter 2023, the BSP noted that the economy’s total financial claims on the ROW “were predominantly loans (39.5 percent), debt securities (31.2 percent), and equity and investment fund shares (14.4 percent).”
Bulk or 42 percent of the country’s financial obligations to the ROW were loans, while 34.9 percent and 17.3 percent were equity and investment fund shares and debt securities, respectively.
Meanwhile by sector on a year-on-year basis, the OFCs’ net financial liability position increased and the BSP said this was “driven by higher loans availed from banks as well as the rise in the other financial corporations’ holdings of equity and debt securities issued by the sector (and) loans from the rest of the world and non-residents’ holdings of equity securities issued by the sector expanded.”
The report said the government’s net financial liability position widened by 2.7 percent in the second quarter to P8.7 trillion from P8.5 trillion because of “lower deposits with the other depository corporations and the higher holdings of government securities of the other depository corporations and the other financial corporations.”
The households’ net financial asset position increased by 1.2 percent in the second quarter to P12.4 trillion from P12.2 trillion due to the increase in the sector’s holdings of equity and investment fund shares issued by the other financial corporations, said the BSP.
“Consistent with the quarterly development, the households’ net creditor position increased year-on-year due primarily to the increase in the sector’s holdings of other financial corporations-issued equity and investment fund shares. Likewise, the sector’s net creditor position to the other depository corporations grew as the households’ deposits increased,” it added.
Despite the increase in its financial liabilities, the households’ stock of financial assets was three times more than the amount of its financial obligations.
The ODCs’ net financial asset position also increased by 7.3 percent in the second quarter 2023 to P1.9 trillion from P1.7 trillion. However on a year-on-year basis, it declined due to the increases in the following: deposits from the other financial corporations; loans from the rest of the world; and holdings of bank-issued equity securities by non-residents.
As for the BSP, the report said its net financial asset position in the second quarter 2023 stood at P836.5 billion, up by 5.9 percent from P789.7 billion previously, as “deposits from the other depository corporations declined (and) this was mitigated by the increase in deposits from the general government.”
On a year-on-year basis, the central bank’s net creditor position increased by 5.4 percent from P793.4 billion in 2022 mainly because of the 24 percent decline in NG deposits with the BSP.