THE Philippines’s net external liability position widened in the fourth quarter of last year owing largely to the expansion of the net external liability positions of the non-financial corporations (NFCs) and the general government (GG).
According to a report by the Bangko Sentral ng Pilipinas (BSP), the country’s net external liability position grew by 34.8 percent to P1.3 trillion in the last three months of 2021 from P971.1 billion in the fourth quarter of 2020.
The report on the country’s net external liability position is part of the Central Bank’s Philippine Balance Sheet Approach, which is a presentation of the country’s financial balance sheets on a from whom-to-whom (wtw) basis using the aggregate balance sheet data of each sector of the economy.
The report is a financial stability surveillance tool developed by the International Monetary Fund (IMF) and used to monitor the potential vulnerabilities of economic sectors and their relationships with one another.
According to the BSP, the BSA is also useful in identifying the possible emergence of a financial crisis, specifically those arising from asset-liability mismatches and increasing balance sheet interlinkages.
Broken down, NFCs in the country continued to post higher net borrowings from the rest of the world (ROW) and other financial corporations (OFCs).
Meanwhile, the GG’s net financial liability position also widened as the National Government (NG) continued to tap domestic and foreign funding to support its programs for socio-economic recovery given the extensive negative effects of the pandemic.
Households (HHs), on the other hand, registered as the country’s highest net creditor, posting improvements in savings and investments as reflected in the following: increase in deposits with banks; expansion in the HHs’ holdings of equity and investment fund shares issued by other financial corporations; increase in the insurance, pension and standardized guarantee schemes attributed to HHs; and buildup of domestic currency holdings.
Likewise, the other depository corporations’ (ODCs) net creditor position improved, brought about by the increase in the sector’s net financial assets with the GG and non-residents.
Similarly, the Central Bank’s (CB) net creditor position expanded on account of its higher net external assets. This development was supported by the year-on-year increase in the peso equivalent of the CB’s reserve assets.
