Net external liability position widens in Q3

MANILA, Philippines — The country’s net external liability position stood at $74.2 billion as of end-September 2024, 33 percent higher than the $55.7 billion recorded in end-June, according to the Bangko Sentral ng Pilipinas (BSP).

In its latest preliminary international investment position (IIP) report, the BSP said the country’s net external liability position was higher in the third quarter of 2024 compared to a quarter ago due to  higher external financial liabilities, which outpaced the growth in external financial assets.

As of end-September 2024, the country’s total outstanding external financial liabilities jumped by 10 percent to $329 billion from a quarter ago, while the total outstanding external financial assets increased by 4.8 percent to $254.7 billion.

The third-quarter net external liability position was also 60 percent higher than the net liability of $46.4 billion as of end-September 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 increase in external financial liabilities during the third quarter of 2024 can be attributed to higher foreign portfolio investments (FPI) in the form of securities.

Net FPI grew by 18.7 percent to $104.4 billion due to the notable increase in nonresidents’ outstanding investments in debt papers, particularly government securities and equity securities of local corporations.

“The high demand for the newly issued government securities at competitive pricing reflected continued investor confidence in the country’s economic resilience, despite global challenges,” the BSP said.

Nonresidents’ outstanding investments in equity securities went up during the review period due to upward valuation and additional inflows, mirroring the rise in the Philippine Stock Exchange Index. The PSEi rose to 7,272.65 in end-September from 6,411.91 in end-June.

“Positive investor sentiment was boosted by the country’s strong economic prospects amid interest rate cuts, a robust consumer sector, and healthy external payments position,” it said.

The central bank also said that foreign direct investment rose by 6.8 percent to $132 as nonresidents’ net investments in equity capital and debt instruments increased.

Meanwhile, the external financial assets rose due to the country’s accumulation of reserve assets, which reached $112.7 billion as of end-September 2024.