Philippines net external liability position narrows in Q2

MANILA, Philippines — The country’s net external liability position stood at $55.2 billion as of end-June, 6.5 percent lower than the $59.1 billion recorded in end-March, according to the Bangko Sentral ng Pilipinas (BSP).

In its latest preliminary international investment position (IIP) report, the BSP said the net external liability position went down due to the contraction in external financial liabilities, which outpaced the decline in external financial assets.

As of end-June, the country’s total outstanding external financial liabilities declined by 1.7 percent to $298.75 billion, while total outstanding external financial assets decreased by 0.5 percent to $243.53 billion.

The second-quarter net external liability position was also 19.5 percent higher than the net liability of $476.2 billion as of end-June 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 decline in external financial liabilities during the quarter can be attributed to lower foreign portfolio investments (FPI) in the form of securities and foreign direct investments (FDI) in the form of equity capital.

The contraction in FPI and FDI was mainly due to downward valuation adjustments. The downward valuation of FPI mirrored the decrease in the Philippine Stock Exchange index (PSEi) to 6411.91 in end-June 2024 from 6,903.53 in end-March 2024, the BSP said.

Meanwhile, the decrease in the country’s external financial assets was attributed to lower 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 $105.9 billion as of end-June.

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

About 45 percent of the country’s total external financial assets were held by the BSP, while 14 percent were in banks. The remaining 41 percent are in other sectors.

Meanwhile, 59 percent of the country’s external financial liabilities are in other sectors, followed by the national government’s external liabilities with 26.4 percent, banks with 13.3 percent and the BSP with 1.3 percent.