PHL net external liability widens

THE COUNTRY’S net external liability widened during the second quarter, picking up on the back of investment flows and a weaker peso, the Bangko Sentral ng Pilipinas (BSP) said.

The country’s international investment position (IIP) widened to a net liability of $33.776 billion as of end-June from $29.248 billion during the first quarter, the central bank said in a statement over the weekend. This also spelled a slight decline from the $33.93 billion net liability posted in end-June 2016.

The IIP, which measures the stock of a country’s financial claims and liabilities, is a companion framework to a country’s balance of payments (BoP) statistics.

The country’s BoP position stood at a $706-million deficit as of end-June, wider than the $500 million expected by the central bank for the entire year.

External financial liabilities held by the Philippines grew by 3.2% to reach $198.303 billion during the first semester, which outpaced the 0.9% increase in foreign financial assets worth $164.528 billion.

The higher amount owed to the rest of the world came on the back of “positive price revaluations” of local securities and equity placements held by foreigners, which came as the peso depreciated versus the dollar during the first semester.

“Peso depreciation implies that peso-denominated liabilities result in lower US dollar equivalent,” the BSP said in a report, noting that the peso averaged at P50.466 to a dollar as of end-June from the P50.194 average during the first quarter.

“[T]he growth in liabilities emanated from higher outstanding debt instruments held by non-resident affiliates and increased holdings by non-residents of equity securities issued by residents,” the central bank said.

Bigger investment flows also contributed to the wider liability position, with foreign direct investments (FDI) totaling $3.598 billion as of end-June. On the other hand, the country saw more flighty foreign funds plucked out during the period, with portfolio investments netting a $460.83-million outflow.

Meanwhile, external financial assets held by the Philippines posted a slight rise on the back of bigger loans extended to foreigners and a continued build-up in reserves.

Gross international reserves held by the BSP took about half of the total assets at $81.3 billion, as the central bank continues to beef up buffers against external shocks. Intercompany lending accounted for 15.3%, while FDI placements on shares of stock took a 12.1% share, the BSP said.

Banks held $33.4 billion in net external liability, while those held by the general government reached $34.7 billion.

By type of instrument, 27.3% of offshore liabilities came in the form of equity securities issued to foreigners, 22.8% in equity capital held by affiliates, and 21.2% in loans from global lenders. — Melissa Luz T. Lopez