The country’s so-called flow of funds in 2020, which helps indicate whether the USD406 billion economy borrows from or actually lends money to the growth-producing economic sectors, show a sharp 26.1 percent drop in domestic saving to P3.7 trillion from P5 trillion in 2019.
During the year, all sectors that typically contribute to domestic saving – the non-financial corporations, households and the general government – became dissavers posting sharply lower saving than the year before.
According to data from the Bangko Sentral ng Pilipinas (BSP), household saving dropped 6.8 percent in 2020 to only P983.2 billion from P1.1 trillion the year before. The non-financial sector, which had saving worth P2.8 trillion in 2019, posted saving only P2.2 trillion or 20.5 percent lower the following year.
But the biggest dissaver that year, the BSP said, proved to be the general government when it posted a deficit of P58.1 billion, a complete turnaround from surplus of P801.5 billion the year before. This was the year when the economy was in lockdown due to the Covid-19 pandemic and government had to spend as mobility restrictions and domestic consumption as well and the production activities of the major industries practically ceased.
“Overall, the domestic economy became a net lender vis-à-vis the rest of the world at P575.9 billion, a reversal from the previous year’s net borrower position of P152.7 billion. This reflected the movement in the country’s current account — which reversed from a deficit in 2019 to a surplus in 2020. The reversal was caused mainly by the contraction in trade in goods deficit, resulting from the sharp decline in the importation of goods,” the BSP said.
Capital accumulation during the period fell nearly 40 percent to only P3.1 trillion from P5.2 trillion as all four sectors posted falling numbers. The real investment of the non-financial sector, for instance, fell 43.3 percent to only P1.6 trillion, the financial corporations down 24.2 percent to only P87.3 billion, households down 64.4 percent to only P343.6 billion and the general government by 12.3 percent to only P1.1 trillion.
As a result, the domestic economy transitioned from net borrower in 2019 when it posted a deficit of resources worth P152.7 billion instead of the surplus of P575.9 billion in 2020 when the economy drew from the resources of all sectors to keep itself going.
