Private, public sectors borrowing more, says BSP

Nonfinancial corporations in the Philippines sank deeper into a net debtor position with aggregate liabilities rising by 18 percent to P7.9 trillion at the end of the third quarter of 2021 from P6.7 trillion, according to the Bangko Sentral ng Pilipinas (BSP).

The BSP said in its latest report related to its use of the “balance sheet approach” that nonfinancial corporations incurred higher net liabilities against the other financial corporations and the rest of the world as both sectors remained major sources of financing.

Nonfinancial corporations refer to private and public entities that are mainly engaged in the production of market goods and nonfinancial services.

The balance sheet approach is a financial stability surveillance tool developed by the International Monetary Fund, which is used to better monitor the potential vulnerabilities of economic sectors and their relationships with one another.

Also, this approach is useful in identifying the possible emergence of a financial crisis, specifically those arising from asset-liability mismatches and increasing balance sheet interlinkages.

The position of nonfinancial corporations was cited as a main factor that put the Philippines’ at a net external liability position of P999 billion at the end of September last year.

This was more than double the net external liability P420.6 billion a year earlier.

Another major drive was the general government—referring to the national government, local government units, social security agencies and extra-budgetary units such as the Philippine National Railways and National Irrigation Administration.

Government borrowings

The general government’s net debtor position also widened by 24 percent to P6.6 trillion from P5.3 trillion.

The BSP said this reflected the higher financing needs of the national government given its efforts to provide the necessary social assistance to Filipinos in need during the pandemic and its initiatives to support the economic recovery of the country—including the continuation of its “Build, Build, Build” program.

In terms of gross liabilities, the general government’s exposure widened by 25 percent to P12.7 trillion from P10.2 trillion in the third quarter of 2020.

Meanwhile, households remained the highest net creditor among the domestic sectors at P10.1 trillion, up 14 percent year-on-year from P8.9 trillion.

This was mainly due to the sector’s higher net claims on the financial corporations.