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PHL net external liability down as of March

THE COUNTRY’S net external liability position narrowed at end-March as the government paid its maturing bonds and as its investments in equities declined in value due to market volatility in the period amid a rise in coronavirus disease 2019 (COVID-19) cases.

The country’s international investment position (IIP) stood at net external liability of $15.3 billion as of March, down by 24.1% from the $20.2 billion logged at end-December 2020, based on preliminary data from the central Bangko Sentral ng Pilipinas (BSP). On the other hand, the country’s net external liability rose by 10.9% as of end-March from $13.8 billion a year earlier.

The IIP takes into account the country’s financial claims and liabilities.

External financial liabilities slipped 3.3% to $245.8 billion as of end-March from $254 billion as of end-December 2020. This outpaced the 1.49% decline in residents’ foreign financial assets to $230.4 billion from $233.9 billion.

The downward revaluation of short-term foreign portfolio investments and foreign direct investments (FDI) in equity instruments resulted in an external financial liability in the period, the BSP said in a statement.

“This reflected the decline in the Philippine Stock Exchange index towards the end of the first quarter on the back of spike in COVID-19 cases during the period, the subsequent reimposition of containment measures, and concerns that these may impact on economic growth negatively,” the central bank explained.

“The repayments of maturing bond issuances by the national government as well as foreign loans by the banks contributed to the decrease in the external financial liabilities of the country,” it added.

Short-term foreign investments or hot money yielded a net outflow of $483 million in the first three months of the year, albeit smaller by 65.5% from the $1.4 billion net outflow in the same period of 2020.

Meanwhile, FDI inflows that went to equity and investment fund shares slipped 2.1% to $946 million in the first quarter from $967 million a year earlier.

On the other hand, the decline in the stock of the country’s total external financial assets was driven mainly by lower level of gross international reserve assets to $104.5 billion from $110.1 billion as the BSP diversified its foreign currency assets to include non-reserve assets.

The central bank held the largest share of residents’ total external claims, making up $109.4 billion or 47.5% of the total. These assets were mostly in the form of reserve and net placements in debt securities issued externally.

Nearly half (45.6%) or $104.5 billion of these external financial assets were reserves held by the BSP. Meanwhile, residents’ net investments in debt instruments ($36.5 billion), debt securities ($29.9 billion), and equity capital ($28.3 billion) made up 15.8%, 13%, and 12.3% of the total external financial assets, respectively.

Major financial assets such as net placements in foreign currency and deposits (6.7%) and loans extended to non-residents (4.9%) also contributed to the country’s external claims. — LWTN

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