PH’s external liabilities down to $29B at end ’15

The country’s net liabilities slightly slid to $29 billion at the end of 2015 as external financial assets grew at a faster pace during the fourth quarter, the Bangko Sentral ng Pilipinas reported Friday.

The country’s end-December preliminary international investment position (IIP) was below end-September’s $29.6 billion.

The international investment position 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 because sooner or later, these investors will pull out and pocket their profits.

A net liability position means more foreign money is invested in the country than the total amount of investments made by Filipinos abroad.

While both total external financial assets as well as total external liabilities rose quarter-on-quarter, growth in the former was faster.

At end-2015, total external financial assets rose 2.1 percent quarter-on-quarter to $155.1 billion.

The BSP attributed the quarter-on-quarter rise in external financial assets to the “increase in other investments, particularly loans extended by local banks to non-residents and local corporates’ deposits abroad.”

“Direct investments also recorded increases in resident companies’ equity capital placements abroad and lending to non-resident affiliates coupled with positive revaluation adjustments due to both price and exchange rate movements,” it added.

But the BSP noted that the October to December period saw a decline in residents’ holdings of foreign portfolio investments or so-called “hot money.”

Total external financial liabilities, meanwhile, increased 1.5 percent to $184.1 billion.

“The growth in total external liabilities was due largely to the increase in local banks’ availment of loans from abroad (other investments). Non-residents’ placements of equity capital in intercompany lending to resident affiliates (foreign direct investments or FDI) also rose on the back of investor confidence in the country’s macro-economic fundamentals and favorable growth prospects.  Non-residents’ investments in debt securities issued by local banks and corporates (portfolio investments) likewise increased,” the BSP explained.

The increase in external liabilities, however, was partially offset by “non-residents’ net withdrawal of investments in equity securities issued by residents following concerns related to the US interest rate lift-off which have contributed toward increased investor risk perception and a flight to safe-haven assets,” the BSP said.