THE country’s international investment position (IIP) surged to 26 percent at the end of 2011 despite the rise in risk aversion following global economic turmoil and intensified financial strains brought about by the financial and debt crisis at the eurozone, according to the Bangko Sentral ng Pilipinas (BSP) on Monday.

In a statement, the central bank said that notwithstanding heightened market volatility and waning risk appetite, capital flows into the country remained robust in 2011, reflecting investors’ confidence in the country’s sound macroeconomic fundamentals.

Preliminary IIP data as of end-December 2011, indicated that the country’s net liability position improved by 25.8 percent to $19.5 billion, from the revised end-2010 level of $26.3 billion. This emerged as the growth in the country’s total external financial assets nearly tripled compared to total external financial liabilities.

The BSP further explained that the total external financial assets or claims of residents on the rest of the world increased by 14.2 percent to $110 billion at end-2011, from its year-ago level of $96.3 billion. Also, total external financial liabilities increased by 5.6 percent to reach $129.5 billion relative to $122.6 billion as of end-2010.

Across sectors, the BSP recorded a higher net external position while the banks, general government, and other sectors posted lower net positions during the review period. In particular, the BSP’s net external asset position improved considerably by 21.2 percent to $73.9 billion at end-December 2011, compared to the $61 billion posted at end-2010.

The $10.2-billion surplus in the balance of payments (BOP) enabled the BSP to build up its gross international reserves (GIR), which provided cushion against external shocks. Meanwhile, the huge drop in the central banks’ total external assets, combined with a 17.9-percent increase in its foreign liabilities, resulted to a net liability position of $2.7 billion.

This was a marked reversal to the $1.9-billion net asset position recorded at end-2010. On the other hand, the general government remained a net user of foreign resources, posting a higher net liability position of $42.7 billion relative to the year-ago level of $39 billion.

The bond flotation, amounting to $2.8 billion, net issuances of peso-denominated government securities in the domestic market, worth $2 billion, as well as foreign loan availments by the national government contributed to the increase in financial liabilities of the general government. 

Similarly, other sectors recorded a net liability position of $48 billion. However, this was slightly lower than the $50.2 billion recorded in the previous period.

The IIP is a companion framework to the BOP statistics. While the BOP is a statistical statement that records the country’s transactions or flows with the rest of the world for a given period, the IIP summarizes the country’s stock of financial claims on and financial liabilities to the rest of the world as of a specific reporting period. 

Similar to the BOP’s financial account, the assets and liabilities in the IIP are classified as direct investments, portfolio investments, financial derivatives and other investments. By 2014, the BSP will start releasing quarterly IIP statistics in compliance with the International Monetary Fund’s recommendation of enhancing the Special Data Dissemination Standard to improve the availability and timeliness of compiling and disseminating IIP data.

Source: Manila Times