PRELIMINARY data on the country’s net international investment position (IIP) as of December showed an overall net liability position of $43.4 billion, $7.9 billion higher than the $35.5 billion recorded as of September.
The higher negative balance stemmed from the 5.7 percent increase in total external financial liabilities which outpaced the 2.2 percent growth in total external financial assets. As of 2017, total external financial liabilities reached $214 billion, while total external financial assets stood at $170.6 billion.
External financial liabilities increased as foreign portfolio investments (FPI) expanded by 7.8 percent on account of the combined effect of price adjustments and the 4.7 percent growth in the Philippine Stock Exchange index (PSEi) to 8,558.42 at the end of 2017.
Foreign direct investments (FDI) likewise rose by seven percent on the back of investor confidence on the country’s sound macroeconomic fundamentals and growth prospects.
Moreover, the appreciation of the Philippine peso against the US dollar contributed partly to the overall increase in the country’s external financial liabilities as peso-denominated instruments posted higher US dollar equivalents.
Meanwhile, the country’s external financial assets improved as of December as all components registered growth led by residents’ direct (3.3 percent) and portfolio (6.3 percent) investments abroad. The accumulation in the country’s reserve assets (0.8 percent) contributed to the overall expansion of external financial assets.
On a year-on-year basis, the country’s net external liability position was higher by 55 percent than the prior year’s level of $28 billion.
Net IIP weakened due to the 13.1 percent increase in external financial liabilities, which outperformed the 5.8 percent increase in external financial assets. The expansion in liabilities emanated mainly from the influx of FDI, which recorded an all-time high of $10 billion in 2017.
Likewise, the hefty accumulation of FPI, particularly non-residents’ holdings of equity securities that were issued by residents, contributed to the rise in liabilities. The 25.1 percent increase in the PSEi from the 6,840.63 level as of 2016 reflected the growth in stock prices and the expansion in FPI during the period.
Across sectors, the Bangko Sentral ng Pilipinas (BSP) remained the sole net lender of resources to the rest of the world with a net asset position of $80.4 billion as of December. By contrast, the other major sectors remained net users (borrowers) of foreign resources.
As of December, about half (47.9 percent) of the country’s total external financial assets were held by the BSP. The other sectors’ external financial assets comprised more than a third (36.6 percent) of the country’s total external financial assets while banks held the remaining 15.5 percent. (PR)