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October 07, 2022

Manila status as debtor nation worsens

The country’s status as a debtor nation turned worse in updated numbers released by the Bangko Sentral ng Pilipinas.

According to the BSP, the country’s net international investment position (NIIP), which indicates whether the $361 billion economy has more foreign assets than liabilities, widened in the final quarter of 2021 to $27.6 billion.

This compared with negative NIIP of only $22.6 billion at end-September 2021, which kept the Philippines in the list of countries with net investment liabilities.

In the years after 1986 when Filipinos drove then dictator and President Ferdinand Marcos, subsequent fiscal and monetary policy reforms enabled the Philippines to overcome decades of mismanagement and abuse that came in the form of a positive NIIP soon after President Joseph Estrada came into power, making the Philippines a creditor country again.

Latest numbers from the BSP, however, show the Philippines reverting to net debtor country as its NIIP turned negative.

According to the BSP, the NIIP turned into a net international liability position $5 billion wider in Q4 2021 than a quarter earlier.

“This was on account of the 3.2 percent increase in the country’ total external financial liabilities during the quarter, which outpaced the 1.4 percent growth in total external financial assets.

“As of end-December 2021, total outstanding external financial liabilities reached $268.6 billion, while total outstanding external financial assets amounted to $241 billion,” the BSP said.

“The country’s total external financial liabilities expanded during the quarter, following the increases recorded across all major accounts. In particular, foreign direct investments (FDI) rose by 3.4 percent to $110 billion largely on account of transaction inflows in the form of non-residents’ net investments in debt instruments (or intercompany borrowing) and the upward revaluation of net equity placements.

Other investments grew by 5.2 percent to $66.9 billion due mainly to loans availed by the resident deposit-taking corporations (banks) from non-residents. Foreign portfolio investments (FPI) also rose by 1.7 percent to $91.4 billion. The upward revaluation of FDI and FPI equities reflected the rise in the Philippine Stock Exchange index (PSEi) towards the end of the quarter,” the BSP said.

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