PH external liabilities shrink 28% in 2015

April 1, 2016 11:43 pm

Current account surplus, higher GIR improve PH overall investment position

The Philippines’ international investment position (IIP) improved by 28 percent in 2015 in spite of a slight drop in foreign investments in the country, driven primarily by a strong current account surplus and larger gross international reserves (GIR), the central bank said on Friday.

Data released by the Bangko Sentral ng Pilipinas (BSP) showed that the country’s net external liabilities reached $29 billion as of end-2015, 28 percent lower than 2014’s $40.7 billion, and 2 percent lower than the $29.6 billion at end-September 2015.

Investments in the country are considered liabilities because the funds are owned by foreigners, who are assumed to eventually cash in on gains and pull investments out the country.

Sought for comment, Bank of the Philippine Islands (BPI) Associate Economist Nicholas Antonio Mapa said the country’s IPP has improved year-on-year.

“The Philippines continues to see an improved IIP as we run current account surpluses and thus are a net creditor nation to the rest of the world. We also see an improved IIP as the Philippines continues to hold gargantuan GIR [gross international reserves] and local corporates are opting to originate loans onshore given the low domestic interest rates sans the exchange rate risks,” Mapa said in an interview via e-mail.

The country recorded a surplus of $2.616 billion as of end-2015, which is indicative of the increase in the Philippines’ gross international reserves (GIR) or foreign exchange reserves last year.

The BSP also noted Filipinos’ investments overseas through external financial assets rose by 4 percent to $155.1 billion in 2015 from $148.5 billion in 2014.

The BSP said that growth in external financial assets—or investments of Filipinos all over the world—was boosted by loans of Philippine banks to foreigners and by local corporates’ deposits abroad. Increases in direct investments due to price and forex movements were also a factor, which raised offshore equity capital placements and lending to international affiliates.

Growth in external assets offset a decline in total external liabilities, or foreign investments in the country, of 2.7 percent to $184.1 billion in 2015 from $189.2 billion a year ago.

The moderate decline in external liabilities was largely due to the increase in local banks’ availments of loans from sources abroad, the central bank said.

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