International investment position weakens 5.6% in end-June

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) reported the net external liability position of the Philippines increased by 5.6 percent in the second quarter of the year amid high intercompany borrowings by resident affiliates.

Data released by the central bank showed the country’s preliminary net external liability position reached $33.4 billion in end-June this year or $1.8 billion higher.

Total external financial liabilities went up by 3.2 percent to $6.2 billion, exceeding the $4.4 billion build-up by 2.8 percent in total external financial assets.

As of the end of the fist half, total external financial liabilities reached $196.1 billion, while total external financial assets stood at $162.8 billion.

International investment position refers to the stock of a country’s financial claims and liabilities.

According to the BSP, the growth in external financial liabilities during the quarter was buoyed by increases in net inflows of foreign direct investments, both intercompany borrowing by resident affiliates and equity capital on the back of the country’s sustained positive economic performance and growth prospects.

On the other hand, the four percent increase in foreign portfolio investments or hot money was due mainly to the positive price revaluations of non-resident’s holdings of domestic equity securities as the Philippine Stock Exchange Index (PSEi) appreciated by 7.4 percent during the quarter.

Total external financial assets during the quarter went up 2.8 percent driven mainly by the build-up of the country’s reserve assets.

“Increases in residents’ lending to non-residents’ affiliates and residents’ investments in debt securities issued by non-residents also contributed to the growth of the country’s total external financial assets,” the BSP said.