The expansion of the Philippines’ total debt from foreign creditors continued outpacing the growth of its total foreign assets during the third quarter of 2024, according to the central bank.

Data on the country’s net international investment position (IIP) revealed that the net liability clocked in to $74.2 billion by the end of September, mainly due to a 10.1 percent increase in external financial liabilities, exceeding the 4.8 percent growth in external financial assets.

The Bangko Sentral ng Pilipinas (BSP) reported that as of end-September, the country’s foreign debts totaled $328.9 billion, while external financial assets reached $254.7 billion.

As per the BSP, foreign portfolio investments (FPI), also known as “hot money”—which can quickly exit an economy during times of uncertainty—was the main driver to the external debt hike. 

Net hot money expanded by 18.7 percent to $104.4 billion, driven by a 14 percent increase in government debt investments and a 26 percent rise in local company stocks.

“The high demand for the newly issued government securities at competitive pricing reflected continued investor confidence in the country’s economic resilience, despite global challenges,” the BSP said in a statement released on Friday, Dec. 27.  

Meanwhile, nonresidents’ investments in equity securities increased, driven by higher valuations and inflows, reflecting the rise in the  Philippine Stock Exchange Index (PSEi). 

Investor confidence grew due to the country’s strong economic outlook, supported by interest rate cuts, a strong consumer sector, and healthy external payments.

Foreign direct investment (FDI) also increased by 6.8 percent to $132.1 billion as foreign investors put more money into local businesses and bonds. At the same time, other investments grew by 6.1 percent to $92.1 billion, as locals took out more foreign loans.

The country’s external financial assets grew by 4.8 percent to $254.7 billion, driven by a 7.1 percent increase in reserve assets to $112.7 billion. Additional growth came from higher investments in foreign debt papers, direct debt instruments, and equity capital of foreign affiliates.

Despite a 9.5 percent rise in external financial assets, the country’s net external liability position grew by 60.1 percent year-on-year to $74.2 billion due to a 17.9 percent increase in external financial liabilities. 

As of September, the BSP held the largest share of external financial assets at $117.8 billion, driven by a 7.1 percent increase in gross international reserves (GIR). Other sectors held 39.7 percent of the assets, while the banking sector accounted for 14.1 percent.

As for the external financial liabilities, Other Sectors held the largest share at $193.0 billion, driven by increased foreign investments. The government’s liabilities grew to $88.6 billion, while the banking sector and BSP held smaller shares.