IIP improves as local firms boost investments abroad

The Philippine economy became less vulnerable to crises abroad as the country’s international investment position (IIP) improved in 2014, the Bangko Sentral ng Pilipinas (BSP) reported on Wednesday.

In a statement, the BSP said the country’s better standing stemmed from foreign investments made by local firms eager to expand operations outside Philippine borders.

“As global growth prospects remain solid, particularly in the US, China and India, residents have explored investment opportunities abroad,” the BSP said.

The country’s preliminary end-December 2014 IIP improved from its end-September 2014 position, the BSP said. The net liability position decreased by $4.7 billion to $40.7 billion from the $45.4 billion recorded as of the end of the previous quarter.

Year-on-year, the country’s net liabilities were up $4.7 billion.

An increase in total external financial assets ($7.1 billion) exceeded the increase in total external financial liabilities ($2.4 billion), the BSP said. Total outstanding external financial assets reached $148.5 billion as of end-December 2014, while total outstanding external financial liabilities amounted to $189.2 billion.

The IIP is the difference between external assets and liabilities. External assets refer to investments made by Filipinos overseas. Foreign investments in the Philippines, meanwhile, are counted as liabilities.

The increase in total external liabilities was mainly on account of Filipinos borrowing from abroad coupled with the increase in foreign direct investments. Last year, foreign direct investments in the country rose to a record high $6.2 billion.

The BSP continued to hold the biggest share of residents’ total claims on the rest of the world amounting to $80.1 billion (53.9 percent) as of end-December 2014, albeit lower than the $80 billion in holdings as of end-September 2014.

More than half (53.5 percent) of residents’ total holdings of external assets as of end-December 2014 were reserve assets held by the BSP amounting to $79.5 billion.

Investments in debt instruments or inter-company lending accounted for 13.6 percent of total external financial assets, equity capital (10.5 percent), Filipinos’ deposits abroad (10 percent), and debt securities (6.7 percent). Paolo G. Montecillo