Private and public sectors are borrowing more, says BSP

Private and public sectors are borrowing more, says BSP

According to Bangko Sentral ng Pilipinas (BSP), non-financial corporations in the Philippines sank further into a net debtor position with aggregate liabilities up 18% to 7.9 trillion pesos at the end of Q3 2021 from 6 700 billion pesos.

The BSP stated in its latest report on its use of the “balance sheet approach” that non-financial corporations incurred higher net liabilities to other financial corporations and to the rest of the world, as both sectors remain the main sources of funding.

Non-financial corporations refer to private and public entities that are primarily engaged in the production of market goods and non-financial services.

The balance sheet approach is a financial stability monitoring tool developed by the International Monetary Fund, which is used to better monitor the potential vulnerabilities of economic sectors and their relationships with each other.

In addition, this approach is useful in identifying the possible emergence of a financial crisis, especially those resulting from asset-liability mismatches and growing balance sheet interdependencies.

The position of non-financial corporations was cited as one of the main factors that put the Philippines in a net foreign liability position of 999 billion pesos at the end of September last year.

This was more than double the net foreign liabilities of P420.6 billion a year earlier.

Another major driver was general government – ​​referring to national government, local government units, social security agencies, and extrabudgetary units such as the Philippine National Railways and the National Irrigation Administration.

Public borrowings

The net debtor position of general government also widened by 24% to 6,600 billion pesos against 5,300 billion pesos.

PASB said this reflected the higher funding needs of the national government given its efforts to provide necessary social assistance to Filipinos in need during the pandemic and its initiatives to support the country’s economic recovery, including the continuation of its “Build, Build, build program”.

In terms of gross liabilities, general government exposure widened by 25% to 12.7 trillion pesos from 10.2 trillion pesos in the third quarter of 2020.

Meanwhile, households remained the highest net creditor among domestic sectors at P10.1 trillion, up 14% year-on-year from P8.9 trillion.

This is mainly due to the increase in the sector’s net claims on financial corporations.

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