PH net external liability position declines

End-June 2024 Developments

Preliminary data on the country’s net international investment position (IIP) indicated a net liability position of US$55.2 billion as of end-June 2024, lower by 6.5 percent than the US$59.1 billion recorded in end-March 2024. This development was driven by the 1.7 percent contraction in the country’s external financial liabilities, which outpaced the 0.5 percent decline in external financial assets. As of end-June 2024, the total outstanding external financial liabilities settled at US$298.7 billion, while total outstanding external financial assets amounted to US$243.5 billion.

The country’s total stock of external financial liabilities decreased by 1.7 percent as of end-June 2024. This development was primarily attributable to the recorded declines in net foreign portfolio investments (FPI) in the form of equity securities to US$34.8 billion (by 11.3 percent from US$39.2 billion) and net foreign direct investment (FDI) in the form of equity capital to US$58.2 billion (by 6.5 percent from US$62.2 billion), mainly on account of downward valuation adjustments.

Likewise, the country’s total stock of external financial assets contracted by 0.5 percent, which was driven mainly by the combined decreases in the outstanding value of residents’ net portfolio investments in foreign debt securities to US$31.4 billion (by 6.2 percent from US$33.4 billion), net direct investments in debt instruments to US$41.9 billion (by 1.7 percent from US$42.6 billion), and residents’ net placements of foreign currency and deposits in foreign banks to US$14.4 billion (by 3.1 percent from US$14.9 billion) as of end-June 2024.

On a year-on-year basis, the country’s net external liability position expanded by 19.5 percent from US$46.2 billion in end-June 2023. This was on account of the 6.4 percent growth in total external financial liabilities from US$280.7 billion, notwithstanding the 3.8 percent growth in total external financial assets from US$234.5 billion.

Total external financial liabilities grew by 6.4 percent year-on-year stemming from the collective increases in the nonresidents' net outstanding loans extended to residents by 16.1 percent (to US$75.2 billion from US$64.7 billion), nonresidents’ net outstanding direct investments in debt instruments by 10.9 percent (to US$65.4 billion from US$59.0 billion), and nonresidents’ net outstanding investment in portfolio debt securities by 11.2 percent (to US$53.2 billion from US$47.8 billion).

Meanwhile, the 3.8 percent annual growth in total external financial assets was mainly on account of the country’s accumulation of reserve assets (to US$105.2 billion from US$99.4 billion). The rise in reserves year-on-year reflects the (1) national government’s (NG) net foreign currency deposits with the BSP, (2) BSP’s net income from its investments abroad, (3) upward adjustments in the BSP’s gold holdings and foreign currency-denominated reserve assets, excluding gold, and (4) BSP’s net foreign exchange operations. The other factors that contributed to the expansion in total external financial assets were the growth in residents’ net investments with foreign affiliates in the form of equity capital placements (by 8.1 percent to US$30.6 billion from US$28.3 billion) and intercompany borrowings (by 3.1 percent to US$41.9 billion from US$40.7 billion).

External Financial Assets

The BSP continued to hold the largest share of the country’s total external financial assets at 45.0 percent, valued at US$109.7 billion as of end-June 2024. This represented a 1.0 percent increase from its end-March 2024 level of US$108.6 billion.  The Other Sectors accounted for 41.0 percent of the country’s outstanding external financial assets at US$99.7 billion. The Banks accounted for the remaining 14.0 percent of the country’s total external financial assets, amounting to US$34.1 billion.

External Financial Liabilities

The Other Sectors contributed the largest share to the country’s total external financial liabilities at 59.0 percent or equivalent to US$176.3 billion as of end-June 2024. The 3.8 percent decline in the sector’s stock of external financial liabilities was due mainly to the decrease in nonresidents’ outstanding net direct investments in equity capital (to US$54.4 billion from US$58.3 billion) and net placements in portfolio equity securities (to US$26.8 billion from US$30.1 billion). The NG’s total external financial liabilities reached US$78.9 billion, representing 26.4 percent of the Philippines’ total external financial liabilities. The Banks’ share reached 13.3 percent of the country’s total external financial liabilities at US$39.8 billion as of end-June 2024, which was 0.9 percent higher than the US$39.4 billion level recorded in end-March 2024. Meanwhile, the remaining 1.3 percent or equivalent to US$3.8 billion of the country’s total external financial liabilities were held by the BSP.