The country’s net external liability position widened just a shade under 30 percent to P2 trillion in the fourth quarter last year from only P1.5 trillion a quarter earlier, the Bangko Sentral ng Pilipinas said on Thursday.
The net external liability is an statistical picture of the value of financial assets of residents of an economy that are claims on non-residents, including gold held as reserve assets, and the liabilities of residents of an economy to non-residents.
The BSP traced this development to the higher net external liability positions of the country’s non-financial corporations (NFC) and the general government and to the lower net external asset position of the central bank.
According to the BSP, the NFCs, essentially the state-owned pension funds, the National Home Mortgage Finance Corporation and the National Development Corporation, among others, were the largest debtor in the domestic economy with net liabilities totaling P8.5 trillion in the fourth quarter last year versus only P8.1 trillion a quarter earlier due to its higher net indebtedness against the rest of the world (ROW).
“This arose from the expansion in the NFCs’ gross external liabilities and its lower external assets. The sector’s external assets and liabilities were mostly comprised of loans and equity securities.
“In 4Q 2022, the NFCs’ liabilities-to-GDP ratio decreased slightly to 91.1 percent as the economy’s growth in nominal terms exceeded the increase in the sector’s gross financial liabilities. On a year-on-year (YoY) basis, the NFCs’ net debtor position widened due to its higher net indebtedness to the ODCs. This resulted mainly from the rise in bank loans availed to sustain operations amid heightened consumer demand brought about by the improved economic outlook,” the BSP said.
The general government net debtor position also widened to P8.2 trillion from only P7.7 trillion due to the sector’s deposit withdrawals from the BSP which it used to fund operating expenses for the period.
“The GG remained partly insulated from exchange rate fluctuations as majority of its liabilities were funded by the domestic sectors. Notwithstanding the record-high debt levels, the growth in the GDP outpaced the increase in the GG’s level of borrowings in Q4 2022. As a result, the sector’s liabilities-to-GDP ratio for the quarter decreased to 62.7 percent. YoY, the GG’s net debtor position rose primarily due to the increase in loans from the ROW and higher GS issuances,” the BSP said.
The country’s households (HHs) were the top creditor of the economy at P11.9 trillion in 4Q 2022 from P11.4 trillion in 3Q 2022. The HHs’ net claims on the CB, which were composed mainly of the sector’s currency holdings, increased. Amid the steady increase in the HHs’ assets, the sector’s gross financial liabilities registered double-digit YoY growth rates for the last two quarters of 2022 – the fastest recorded since 1Q 2020. This coincided with the steeper increase in prices as headline inflation accelerated to 7.9 percent in 4Q 2022.
The ODCs’ net creditor position eased to P1.89 trillion in 4Q 2022 from P1.95 trillion in 3Q 2022. In 4Q 2022, the sector’s net claims on the GG declined due to the increase in the GG’s deposits in banks. Meanwhile, the ODCs’ net debtor position to the OFCs widened on the back of the OFCs’ higher deposit placements with the ODCs. Similarly, on a YoY basis, the sector’s net creditor position contracted brought about by the annual increase in deposits from the HHs and OFCs.
The CB’s net creditor position contracted to P811.4 billion in 4Q 2022 from P937.9 billion in 3Q 2022 as its net financial liability positions to the ODCs and the HHs increased. The CB’s higher financial liabilities to these counterparty sectors were due mainly to the expansion in the deposits of the ODCs and currency holdings of the HHs. These developments were mitigated by the increase in the CB’s net financial asset position with the GG which resulted from the substantial decline in deposits from the NG. However, on a YoY basis, the CB’s net creditor position increased mainly due to the NG’s deposit withdrawals.
