Money supply enough to support PHL economic growth – BSP

Although the money circulating in the financial system grew at a slower pace in September, the supply remains ample to support the Philippine economy's expansion, according to the central bank. 

 

Preliminary data released by the Banko Sentral ng Pilipinas (BSP) on Friday show that domestic liquidity rose 8.5 percent to P7.829 trillion from P7.219 trillion in the same period in 2014. This trails the 9 percent growth in August. 

 

"Although the pace is slower, the base had jumped considerably in early 2013 and late 2012," Nicholas Antonio Mapa, associate economist at the Bank of the Philippine Islands, told GMA News Online. 

 

The central bank attributed the increase to the sustained demand  for credit, citing that domestic claims thickened by 12.4 percent year-on-year in September to P7.424 trillion from P6.606 trillion. 

 

"The sustained expansion of domestic liquidity continues to show that there is ample liquidity in the financial system despite the sustained double-digit deployment of funds to lending activities," Mapa noted. 

 

The country's net foreign assets in peso terms also increased by 6.9 percent P3.964 trillion from P3.709 trillion on the back of robust remittances from overseas Filipinos and business process outsourcing firms. 

 

"The continued expansion of domestic liquidity during the month indicates that money supply remains sufficient to support economic growth," BSP Governor Amando Tetangco Jr. noted. 

 

Tetangco's 's comments suggest a possible move to siphon off liquidity in the coming months ahead of the planned implementation of the interest rate corridor, Mapa said. 

 

The BSP is looking at adopting an interest rate corridor supported by auction-based monetary operations by the second quarter of 2016.

 

The auction facility will allow the central bank to engage in more active open market operations and subsequently promote liquidity management by banks and other financial institutions. – VS, GMA News