Tetangco believes of sustained deceleration of M3 growth for 2014

Bangko Sentral ng Pilipinas (Central Bank of the Philippines). Wikipedia photo

MANILA — Growth of domestic liquidity or M3 in the Philippines is projected to sustain its deceleration this year after posting robust growth of over 30 percent at the start of 2014.

Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. is optimistic that M3 growth in the latter part of the year will not be as high as in the previous months.

The central bank targets M3 to post about 15-18 percent growth this year, almost half of the actual growth in recent months.

In January 2014, M3 growth posted its highest expansion of 37.3 percent boosted partly by the adjustments in the rules of the special deposit account (SDA).

These adjustments include ban of foreign funds and investment management account (IMA) funds from the facility.

These changes in the SDA rules increased the volume of domestic liquidity in the system because instead of being deposited in the facility funds were withdrawn and stayed sloshing into the economy.

The ban was made to encourage banks to lend to the productive sectors to further sustain expansion of the domestic economy.

Also, monetary officials stressed that the SDA facility is not an investment option but is among the policy toolkit of the BSP aimed to siphon off excess liquidity in the system.

Asked whether M3 growth will stay within the central bank’s target for 2014, Tetangco said: “much lower.” He, however, declined to give specific levels.

“We have taken steps to deal with liquidity to ensure it doesn’t generate price and financial stability issues,” he added.

As of end-May this year, M3 growth slowed to 28.4 percent, slower than the previous month’s 32.1 percent.