PH external liabilities halved in Q4 of 2020

The Philippines’ net obligations to foreign parties were halved in the fourth quarter of last year due to a decline in borrowings by private nonbank corporations and an increase in investments by Filipino households with extra funds to spare due to a decline in spending 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 three 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 the surge in the BSP’s net foreign claims, a decline in nonfinancial corporations’ net liabilities and reversal of other depository corporations’ position to net external creditors, the central bank said, noting that there was also a sharp increase in the government’s net liabilities to overseas parties.

Banks still risk averse

In particular, nonfinancial 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 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.

Meanwhile, 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 risk averse, limiting the access of companies to credit.

Similarly, private firms’ net external liability position contracted to P3.3 trillion in the fourth quarter from P3.6 trillion during the same period of the previous year. This was mainly on account of the expansion in their 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.

Higher net financial asset

At the same time, the central bank 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 the previous year, mainly on account 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 central bank said.