PHL Net External Liability Widens in Q1 Amid Market Volatility

THE PHILIPPINES’ international investment position (IIP) remained at a net external liability position in the first quarter, widening 8.1% from a quarter earlier to $54.924 billion in the face of heightened market volatility, the Bangko Sentral ng Pilipinas (BSP) said. Year on year, the net liability position narrowed by 2%. The end-of-March net liability was equivalent to 11.2% of gross domestic product, up from the 10.4% recorded in the quarter prior. “This development was mainly driven by a faster decline in external financial assets relative to liabilities. The decline in assets was primarily due to lower reserve assets, largely attributable to BSP foreign exchange operations and National Government drawdowns on its foreign currency deposits with the BSP for debt servicing,” the central bank said in a statement on Wednesday. “In addition, higher bond yields caused by market concerns over geopolitical uncertainties and weak global outlook contributed to downward valuation adjustments in external assets, including foreign-issued debt securities,” it added. The IIP is a gauge of external exposure, providing a snapshot of the value of its foreign financial assets and liabilities. The net position refers to the difference between assets and liabilities and represents either a net claim on or a net liability to the rest of the world. “The IIP provides a snapshot of what the country owns abroad and owes to the rest of the world, making it a key indicator for assessing external vulnerability and financial stability,” the BSP said. Investments in foreign assets fell 2.1% from a quarter earlier to $258.625 billion at the end of March. They rose 1.6% from a year earlier. “External assets declined mainly due to a 3.8% drop in reserve assets to $106.6 billion. The decline in reserves was driven by BSP foreign exchange operations and National Government drawdowns for debt servicing. While valuation gains from higher global gold prices partly mitigated the decline, the overall movement remained downward,” the BSP said. Of the total, 42.7% or $110.4 billion were accounted for by the BSP, with banks holding 15.5% or $40 billion. Other sectors invested a total of $108.2 billion during the period, accounting for 41.8% of the total. The bulk of residents’ foreign investments were reserve assets valued at $106.6 billion (41.2% of the total), followed by debt instruments at $41.3 billion (16%), debt securities $36.7 billion (14.2%), equity capital $35.5 billion (13.7%), currency and deposits $16.6 billion (6.4%), loans $11.5 billion (4.4%) and equity securities $7.8 billion (3%). Meanwhile, external financial liabilities eased 0.4% from a quarter earlier to $313.549 billion at the end of March. Year on year, they were up 0.9%. The general government accounted for 28.5% or $89.3 billion of external financial liabilities during the period. This was followed by banks with $36.3 billion (11.6%), the BSP $3.9 billion (1.2%) and other sectors $184.2 billion (58.7%). Loans made up 26.4% or $82.8 billion of the external liabilities at the end of March. Other forms included debt instruments at $76.6 billion (24.4%), equity capital $57.6 billion (18.4%), debt securities $47.2 billion (15%), equity securities $34.1 billion (10.9%), and currency and deposits $5.3 billion (1.7%). The National Government remained a net debtor with $89.3 billion in liabilities as of March, while other sectors, such as other financial corporations, nonfinancial corporations, and households and nonprofit institutions serving households, had $76 billion in external financial liabilities. The central bank was a net lender during the period, extending $106.6 billion worth of resources worldwide, while banks lent $3.8 billion. — Aaron Michael C. Sy