Philippines net external liabilities widen in Q1

MANILA, Philippines — The country’s net external liability position widened in the first quarter of the year due to higher investment flows and borrowings, a report from the Bangko Sentral ng Pilipinas (BSP) showed.

Preliminary data released by the central bank showed the country’s international investment position (IIP) stood at a net external liability of $59.3 billion in end-March, 15.5 percent higher than the net liability of $51.3 billion in end-December 2023.

The increase stemmed from the 3.8 percent growth in external financial liabilities, which amounted to $303.8 billion in end–March. This outpaced the 1.3 percent expansion in external financial assets, which reached $244.5 billion.

The first-quarter figure was also 25.8 percent higher than the net liability of $47.1 billion as of end-March 2023.

The IIP is a stock estimate of the country’s foreign financial assets and foreign financial liabilities outstanding as of a certain period. In the case of the Philippines, which continues to be a net borrower, the country’s foreign liabilities exceed its foreign assets.

According to the BSP, the growth in external financial liabilities during the quarter can be attributed to the expansion in foreign portfolio investments (FPIs) and foreign direct investments (FDIs).

“The expansion in net FDI and FPI reflects investor confidence in the Philippine economy on the back of the country’s growth and improved domestic inflation dynamics,” the BSP said.

However, other investments in the form of loans rose by three percent to $74.7 billion in the first quarter from $72.5 billion previously, contributing to the rise in the total external financial liabilities of the country.

Meanwhile, the improvement in the country’s external financial assets was attributed to the growth in residents’ net portfolio investments abroad, particularly in debt securities and direct investments in equity capital.

Across sectors, the BSP said it has remained the sole net lender of resources to the rest of the world with a net asset position of $104.8 billion as of end-March.

By contrast, the other sectors, banks and the national government remained net borrowers of foreign resources.

About 44.4 percent of the country’s total external financial assets were held by the BSP, while 14.3 percent were in banks. The remaining 41.2 percent are in other sectors.

Meanwhile, 60.3 percent of the country’s external financial liabilities are in other sectors, followed by the general government’s external liabilities with 25.5 percent, banks with 13 percent and the BSP with 1.3 percent.