PH’s net liabilities hit $27.15B as of Sept.
The country’s net liabilities improved to $27.153 billion as of end-September amid a soft global economic recovery, according to the Bangko Sentral ng Pilipinas (BSP).
The country’s preliminary international investment position (IIP) at the end of the first nine months was 15.2 percent lower than the $32.03 billion as of the end of June.
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 because sooner or later, these investors will be pocketing their profits.
A net liability position means more foreign money is invested in the country than the total amount of investments made by Filipinos overseas.
In a report, the BSP said the improvement in the IIP “reflected stronger balance of payments (BOP) position in the third quarter of 2016, as the country’s BOP registered a surplus of $1 billion.”
The BOP is a summary of all the businesses the country does with the rest of the world. A surplus means the amount of dollars that flowed into the economy was more than the amount that left.
The BSP further noted that the IIP improved despite “tepid growth in the global economy in view of expected modest acceleration of global economic growth in the coming quarters.”
As of the end of September, the total external financial liabilities decreased by 1.5 percent to $194.061 billion from $196.923 billion a quarter ago.
On the other hand, the total external financial assets increased 1.2 percent to $166.909 billion from $164.893 billion three months prior.
“The increase in total external financial assets during the quarter was driven mainly by higher direct investments (by 3.8 percent), particularly the residents’ net placements in equity and investment fund shares and debt instruments (intercompany lending) issued by non-resident affiliates,” the BSP said.
Meanwhile, “decreases in other investments, particularly loans (by 1.4 percent) and trade credits and advances (by 18.1 percent) accounted for the decline in external financial liabilities during the quarter,” according to the BSP.
Also, “foreign portfolio investments fell by 1.3 percent due mainly to the negative price revaluation of non-residents’ holdings of domestic equity securities as the Philippine Stock Exchange Index (PSEi) declined by 2.1 percent during the quarter,” the BSP added.
Foreign portfolio investments are in the form of placements in publicly listed shares, government and private sector IOUs, and deposit certificates.
Portfolio investments are considered short-term bets—hence the nickname “hot money”—because these placements may be pulled out quickly.
Compared with a year ago, the country’s end-September net external liability position also improved as the IIP dropped 5.4 percent year-on-year.
