PHL’S net external liability position reaches US$40.1B as of End-December 2022

Preliminary data on the country’s net international investment position (IIP) indicated a net liability position of US$40.1 billion as of end-December 2022, higher by 30.3 percent than the US$30.8 billion recorded in end-September 2022.

This development was primarily driven by 7.0 percent increase in the country’s total external financial liabilities, offsetting the 3.8 percent growth in its total external financial assets.

As of end-December 2022, total outstanding external financial assets recorded US$229.1 billion, while total outstanding external financial liabilities amounted to US$269.3 billion.

The expansion in the country’s external financial liabilities quarter-on-quarter was buoyed by the 8.0 percent growth in foreign direct investments (FDI) (from US$104.6 billion to US$113.0 billion) and 10.8 percent growth in foreign portfolio investments (FPI) (from US$74.1 billion to US$82.0 billion). In particular, non-residents’ placements of equity capital (FDI) and their holdings of equity securities (FPI) grew by 13.4 percent and 18.0 percent, respectively. This was due mainly to the positive price revaluations, which reflected the rise in the Philippine Stock Exchange Index (PSEi) in end-December 2022.[1]

Likewise, the country’s stock of external financial assets expanded during the quarter, driven mainly by the increase in reserve assets. In particular, reserve assets rose to US$96.1 billion (from US$93.0 billion) due to the National Government’s (NG) net foreign currency deposits with the BSP, which included proceeds from its issuance of ROP Global Bonds, and upward adjustments in the BSP’s foreign currency-denominated reserves and gold holdings.  Increases in direct investments and other investments, particularly residents’ placements in debt instruments (to US$40.0 billion from US$38.3 billion) and deposits abroad (to US$15.9 billion from US$14.5 billion), also contributed to the rise in total external financial assets.

On a year-on-year basis, the country’s net external liability position grew by 42.3 percent from US$28.2 billion in end-December 2021. This was on account of the 5.3 percent decrease in total external financial assets (to US$229.1 billion from US$242.1 billion), which more than offset the 0.4 percent decline in total external financial liabilities (to US$269.3 billion from US$270.3 billion). The contraction in the country’s external financial assets reflected the reduction in the outstanding level of reserve assets (by 11.6 percent from US$108.8 billion) due to the BSP’s net foreign exchange operations, downward adjustments in its foreign currency-denominated reserves (or non-gold reserves), and the NG’s payments of its foreign currency debt obligations. Meanwhile, total external financial liabilities declined by 0.4 percent due to the decrease in FPI by 10.5 percent, notwithstanding the rise in other investments (by 10.5 percent) and direct investments (by 1.3 percent).

External Financial Assets

The BSP held the highest share of residents’ total external financial claims at 43.9 percent, valued at US$100.6 billion as of end-December 2022. This was 3.8 percent higher than the US$96.9 billion asset holdings registered in the previous quarter. The Other Sectors accounted for 40.4 percent of the country’s total stock of financial assets, equivalent to US$92.6 billion as of end-December 2022.[2] The remaining 15.7 percent were held by the Banks, amounting to US$36.0 billion.

External Financial Liabilities

The Other Sectors accounted for the largest share of the country’s total external liabilities at 62.4 percent or equivalent to US$168.0 billion as of end-December 2022. This level was 8.4 percent higher than the outstanding liabilities recorded in the previous quarter at US$154.9 billion. The NG’s total external financial liabilities stood at US$64.1 billion, representing 23.8 percent of the Philippines’ total external financial liabilities. The Banks accounted for 12.4 percent of the country’s total external financial liabilities at US$33.4 billion, while the BSP held a marginal share of 1.4 percent at US$3.8 billion.

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[1] The Philippine Stock Exchange index (PSEi) rose from 5,741.07 in Q3 2022 to 6,566.39 in Q4 2022.

[2] Other Sectors cover the following economic sectors: (a) other financial corporations, which include private and public insurance corporations, holding companies, government financial institutions, investment companies, other financial intermediaries except insurance, trust institutions/corporations, financing companies, securities dealers/brokers, lending investor, Authorized Agent Banks (AAB) forex corporations, investment houses, pawnshops, credit card companies, offshore banking units (OBUs); (b) non-financial corporations, which refer to public and private corporations and quasi-corporations, whose principal activity is the production of market goods or non-financial services; and (c) households and non-profit institutions serving households (NPISHs).