The domestic economy’s total saving reached P3.7 trillion in 2020, 26.1 percent lower than the P5 trillion recorded in 2019 due primarily to the lockdown measures implemented by the government to control the spread of COVID-19. These measures dampened domestic consumption and production activities of major industries. As a result, real investments or capital accumulation fell sharply by 39.5 percent year-on-year. Overall, the domestic economy became a net lender vis-à-vis the rest of the world at P575.9 billion, a reversal from the previous year’s net borrower position of P152.7 billion. This reflected the movement in the country’s current account — which reversed from a deficit in 2019 to a surplus in 2020. The reversal was caused mainly by the contraction in trade in goods deficit, resulting from the sharp decline in the importation of goods.
Saving Institutions
The effect of the pandemic was evident in the 20.5 percent drop in the non-financial corporations’ gross saving to P2.2 trillion from P2.8 trillion in the previous year. Core industries, such as manufacturing, real estate, and utilities supply, managed to post net income during the year, albeit about a third lower from 2019.
The households sector recorded a lower gross saving of P983.2 billion from P1.1 trillion in 2019. The decline in the sector’s saving was due to the adverse effects of the pandemic on domestic and global labor market conditions as reflected through higher unemployment rates and lower inflows of Overseas Filipino personal remittances.
The financial corporations generated an aggregate saving of P564.4 billion, 52.5 percent higher than the P370.1 billion recorded in the previous year. Among the financial corporations’ sub-sectors, the other depository corporations and other financial corporations posted higher saving. In contrast, the Bangko Sentral ng Pilipinas recorded a dissaving during the period.
The general government became a dissaver at P58.1 billion, a reversal from its P801.5 billion saving in 2019. This was driven mainly by the central government’s dissaving, which arose from the surge in government spending on pandemic-related expenditures along with subdued tax collections.
Investing Institutions
The non-financial corporations’ real investments contracted by 43.3 percent to P1.6 trillion in 2020 from the P2.8 trillion recorded in 2019 due mainly to the decrease in private
non-financial corporations’ investing activities. Meanwhile, the public non-financial corporations’ real investments more than tripled due to the development and construction of projects of the Manila Water Sewerage System and Bases Conversion Development Authority.
The general government’s capital accumulation reached P1.1 trillion, 12.3 percent lower than the P1.2 trillion recorded in 2019. All sub-sectors recorded lower real investments during the period, with the central government contributing significantly to the decline in the sector’s capital accumulation.
The lockdown measures also significantly restrained the households’ investing activities as the sector’s real investments decreased markedly to P343.6 billion from the P965.4 billion in 2019. The significant decline was driven mainly by the households’ lower investments in real estate which also caused residential real estate loans to decelerate.
The financial corporations’ real investments fell to P87.3 billion, 24.2 percent lower than the P115.1 billion reported a year ago. The other depository corporations held the largest share of the sector’s real investments in 2020 followed by the Bangko Sentral ng Pilipinas and the other financial corporations.
Lenders and Borrowers in the Economy
The households sector expanded its net lender position to P639.6 billion from P89.6 billion in 2019. This developed amid the sector’s higher acquisition of financial assets which are mostly in the forms of currency and deposits; equity and investment fund shares; and insurance, pension, and standardized guarantee schemes.
The non-financial corporations became a net lender in 2020 from being a net borrower for the last three years, following the sector’s weaker saving and investing activities. The sector’s net acquisition of financial assets increased on higher holdings of currency and deposits and debt securities. Meanwhile, its net incurrence of financial liabilities fell mainly due to lower loan availments from other depository corporations.
The financial corporations’ net lending position reached P477.1 billion, 87.2 percent higher than a year ago, driven by the higher net lending positions of the other depository corporations (by 112.1 percent to P340.2 billion) and other financial corporations (by 104.6 percent to P164.5 billion). Meanwhile, the Bangko Sentral ng Pilipinas became a net borrower at P27.6 billion, a reversal from being a net lender of P14.2 billion in 2019. In terms of instruments, the financial corporations’ net acquisition of financial assets grew due to its higher net accumulation of currency and deposits and government securities.
The general government became a larger net borrower in 2020 at P1.1 trillion, which was 167.6 percent higher than its net borrowing of P423.3 billion in 2019. The central government’s net borrowing more than doubled amid higher funding requirements for the government’s COVID-19 response measures. This more than offset the combined net lending positions of the local government units and social security funds. The general government’s higher net issuances of government securities and increased net loan availments remained important sources of financing during the pandemic.
For more details, the 2020 Philippine Flow of Funds report and statistical tables may be accessed through the following links:
Full Report: https://www.bsp.gov.ph/Media_And_Research/Media Releases/2023_11/news-11092023b1.pdf
Statistical Tables: https://www.bsp.gov.ph/Media_And_Research/Media Releases/2023_11/news-11092023b3.xlsx
