PH economy’s use of foreign resources on the rise, says BSP

The country’s net international investment position showed an overall net liability position of $43.4 billion at the end of 2017, or $7.9 billion higher than the $35.5 billion recorded three months prior—meaning the Philippines was a net user or borrower of foreign resources —the central bank said on Wednesday.

In a statement, the Bangko Sentral ng Pilipinas said the higher negative balance stemmed from the 5.7 percent increase in total external financial liabilities which outpaced the 2.2 percent growth in total external financial assets.

As of end-2017, total external financial liabilities reached $214 billion, while total external financial assets stood at $170.6 billion.

External financial liabilities increased as foreign portfolio investments expanded by 7.8 percent on account of the combined effect of price adjustments and the 4.7-percent rise in the Philippine Stock Exchange index to 8,558.42 at end-2017.

“Foreign direct investments likewise rose by 7 percent on the back of investor confidence on the country’s sound macroeconomic fundamentals and growth prospects,” the BSP said. “Moreover, the appreciation of the Philippine peso against the US dollar contributed partly to the overall increase in the country’s external financial liabilities as peso-denominated instruments posted higher US dollar equivalents.”

Meanwhile, the country’s external financial assets improved as of end-December 2017 as all components registered growth led by residents’ direct (3.3 percent) and portfolio (6.3 percent) investments abroad. The accumulation in the country’s reserve assets (0.8 percent) likewise contributed to the overall expansion of external financial assets.

On a year-on-year basis, the country’s net external liability position as of end-December 2017 was higher by 55 percent than the prior year’s level of $28 billion.

The net international investment position weakened due primarily to the 13.1 percent increase in external financial liabilities, which outperformed the 5.8 percent increase in external financial assets.

The expansion in liabilities emanated mainly from the influx of FDI which recorded an all-time high level of $10 billion in 2017. Likewise, the hefty accumulation of foreign portfolio investments, particularly non-residents’ holdings of equity securities that were issued by residents, contributed to the rise in liabilities. The 25.1-percent increase in the PSEi from the 6,840.63 level as of end-2016 reflected the growth in stock prices and the expansion in portfolio investments during the period.

Across sectors, the BSP remained the sole net lender of resources to the rest of the world with a net asset position of $80.4 billion as of end-December 2017. By contrast, the other major sectors remained net users or borrowers of foreign resources.

As of end-December 2017, 47.9 percent of the country’s total external financial assets were held by the BSP. The other sectors’ external financial assets comprised more than a third (36.6 percent) of the country’s total external financial assets while Banks held the remaining 15.5 percent.—DAXIM L. LUCAS