Fewer company loans, more household investments halved PH external debt in late 2020
MANILA, Philippines—The Philippines’ net obligations to foreign parties were halved in the fourth quarter of 2020 due to a decline in loans by private non-bank corporations and an increase in investments by Filipino households with extra funds to spare during the pandemic.
According to the Bangko Sentral ng Pilipinas (BSP), the country’s net external liability position narrowed to P915 billion in the last four months of 2020 from P1.9 trillion in the same period of 2019.
The 53.1 percent improvement in the country’s net debtor position against the rest of the world was driven by these:
- Surge in the BSP’s net foreign claims
- Decline in the non-financial corporations’ net liabilities
- Reversal of other depository corporations’ position to net external creditors
Non-financial corporations recorded a lower overall net financial liability position of P7.5 trillion in the fourth quarter of 2020 from P8.1 trillion in the fourth quarter of 2019.
This ensued as their net liabilities against the other depository corporations eased by 26.5 percent to P1.6 trillion from P2.2 trillion, as claims rose by 13.7 percent. These claims were mainly in the form of deposits.
The level of these nonbank firms’ gross liabilities with depository corporations was broadly steady at P6.7 trillion in the fourth quarter as banks continued to be averse to risks, limiting the access of companies to credit.
Similarly, private firms’ net external liability position contracted to P3.3 trillion in the fourth quarter of 2020 from P3.6 trillion during the same period in 2019.
This was mainly on account of expansion in its holdings of equity and debt securities issued by the rest of the world and the rise in the the private firms’ lending to related parties abroad.
At the same time, the BSP noted that Filipino households registered a higher net financial asset position of P9.5 trillion in the fourth quarter of 2020 from P8.1 trillion in the same period of 2019.
This was mainly because of higher net financial claims against the financial firms and private corporations.
Deposits with financial firms accounted for half of households’ total assets at P7.6 trillion, higher by 9.3 percent compared to its level in 2019.
“This is in part due to the decrease in household spending brought about by the containment measures implemented by the government to curb the spread of COVID-19,” the BSP said.
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