PHL’s 12.6% M3 in Feb. acceptable for financial deepening—BSP exec

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo said the accelerated M3 growth in the second month of the year is given because of the sustained growth of the economy. (Photo: Chamber of Real Estate and Builders’ Associations, Inc. – CREBA, Inc./Facebook)

MANILA— Growth of domestic liquidity or M3 registered a faster year-on-year expansion of 12.6 percent in February 2017 from month-ago’s downwardly revised 12.3 percent increase but a ranking central bank official is not worried about this development.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo said the accelerated M3 growth in the second month of the year is given because of the sustained growth of the economy.

Central bank data released Friday show that domestic liquidity reached PHP9.4 t

illion as of last February, boosted by the rise in credits, with bank lending, excluding placements in the BSP’s reverse repurchase (RRP) facility, rising 18.1 percent last February from the previous month’s 17.9 percent.

Including RRP placements, outstanding loans of the country’s commercial banks rose 17.5 percent from last January’s 16.2 percent.

The bulk or 89.1 percent of these are accounted for by production loans, which rose 17.6 percent from 17.5 percent last January.

The balance of 10.9 percent is accounted for by household loans, which grew 24.6 percent in the second month this year from last January’s 23.7 percent.

The central bank said domestic claims rose 15.8 percent last February from the previous month’s 15.9 percent “due largely to sustained growth in credit to the private sector.”

Net foreign assets (NFA) in peso value posted a year-on-year growth of 7.2 percent, slower than last January’s 8.7 percent, but continued to be driven by inflows from overseas Filipinos and receipts from the business process outsourcing (BPO) sector.

After the two-day meeting of the policy-making Monetary Board (MB) last March 22-23, the Board decided to cut the central bank’s average inflation projection for this and next year given the latest M3 growth and lower oil prices in the international market.

The BSP’s current average inflation forecast for this year is 3.4 percent from 3.5 percent while the figure for next year is at 3 percent from 3.1 percent, set during the Board’s rate setting meet last February.

Guinigundo said the faster M3 growth last February remains acceptable vis-à-vis the bid to ensure that inflation remains within the central bank’s 2 percent to 4 percent target until 2020.

”We also have to consider some allowance for financial deepening so a growth of 12-14 percent in M3 remains manageable. After all, it is the achievement of the inflation target, which is most important focus of monitoring and policy,” he told PNA in a text message.

“Of course, on balance, when there are inflation pressures building up, you would tend to ensure a more moderate growth in the money supply,” he added.