BSP: RESERVE ASSETS INCREASE BY 7.5%

Based on preliminary data, the country’s international investment position (IIP) posted a net external liability position of US$4.8 billion as of end-September 2020, lower by 64.9 percent than the US$13.6 billion registered in end-June 2020.

The steep decline in the net external liability position quarter-on-quarter was supported mainly by the 6.3 percent growth in the country’s total financial assets (or residents’ outstanding claims on non-residents) to US$222.9 billion, which more than offset the 2 percent increase in the total external financial liabilities (or non-residents’ outstanding claims on Philippine residents) to US$227.7 billion.

The country’s higher total external financial assets were due largely to the accumulation of reserve assets, which increased by 7.5 percent to reach US$100.4 billion as of end-September 2020, from US$93.5 billion a quarter ago.

In addition, the 13.5 percent increase in residents’ portfolio investments, particularly in debt securities issued by non-residents, supported also the expansion in financial assets. Residents’ direct investments and other investments abroad also registered modest gains of 3.2 percent and 3.1 percent, respectively, during the period.

Meanwhile, the moderate growth in the country’s total external financial liabilities can be attributed mainly to the 4.8 percent expansion in other investments to US$57.9 billion from US$55.3 billion as of end-June 2020. These were driven largely by the National Government’s (NG) foreign borrowings (in the form of loan availments) as budgetary support to finance its COVID-19 pandemic response programs as well as various infrastructure projects.

Foreign direct investments (FDI) and foreign portfolio investments (FPI) also recorded positive growths during the period to reach US$95.2 billion and US$73.9 billion, respectively. Positive revaluation adjustments on the NG’s foreign borrowings in the form of loans and debt securities due to the weakening of the US dollar against other currencies during the quarter likewise contributed to the increase in the country’s external liabilities.

On a year-on-year basis, the country’s net external liability position as of end-September 2020 declined by 86.2 percent from US$34.7 billion in the comparable period last year. This developed as the country’s external financial assets rose by 15.3 percent, while its external financial liabilities dipped slightly by 0.2 percent. The expansion in external financial assets stemmed from the increases recorded across all sectors, led by the Bangko Sentral ng Pilipinas (BSP), as reserve assets rose by 17.4 percent, followed by Other Sectors and Deposit-taking corporations except the Central Bank (Banks). Meanwhile, the decline in the country’s total external financial liabilities was due primarily to the 23.1 percent drop in the Banks’ external liabilities following the downward revaluation of non-residents' investments in domestic equity securities amid uncertainties over the prolonged impact of COVID-19 pandemic.

External Financial Assets By sector, the BSP continued to hold the largest share of the country’s total external financial assets at 45.9 percent, amounting to $102.3 billion as of end-September 2020. This was followed by Other Sectors, which accounted for 37.3 percent of the country’s total external financial assets to reach US$83.2 billion as of end-September 2020 (from US$80.2 billion as ofend-June 2020). The remaining 16.8 percent of the country’s total external financial assets were held by Banks amounting to US$37.5 billion (from US$34.2 billion as of end-June 2020).

By type of instruments, the BSP’s reserve assets, amounting to US$100.4 billion as of end-September 2020, comprised almost half (45.1 percent) of the country’s total external financial assets. This was followed by residents’ direct investments in debt instruments and holdings of portfolio debt securities issued by non-residents, which accounted for 15.6 percent and12.1 percent of total external financial assets, respectively. The country’s other major financial assets include residents’ direct investments in equity capital and investment fund shares(11.9 percent), foreign currency and deposits (7 percent), and loans extended to non-residents (5.8 percent). External Financial Liabilities.

The Other Sectors accounted for almost two-thirds (64.2 percent) of the country’s total external financial liabilities, amounting to US$146.2 billion as of end-September 2020 from US$144.9 billion last quarter. The General Government’s external liabilities as of end-September 2020 reached US$50.5 billion, representing 22.2 percent of the country’s total external liabilities. The Banks’ outstanding external liabilities, equivalent to 13.1 percent of the country’s total external liabilities, totaled US$29.7 billion as of end-September 2020 from US$29.8 billion as of end-June 2020. Lastly, the BSP accounted for only 0.6 percent of the country’s total external financial liabilities at US$1.3 billion.

The percent share distributions of the types of financial instruments in the liability side of the IIP remained broadly stable from the previous quarter and a year ago. As of end-September 2020, non-residents’ investments in equity capital reached US$53.4 billion, comprising for 23.4 percent of the country’s total external financial liabilities. This was followed by foreign loans availed by residents amounting to US$50.2 billion or 22 percent of total external liabilities. The country’s other major financial liabilities include non-residents’ investments in debt instruments (18.4 percent), equity securities (17.1 percent), and debt securities issued by residents (15.4 percent).

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