Domestic liquidity growth starts to ease in Dec

MANILA, Philippines - Domestic liquidity growth, which has stayed above 30 percent since July last year, is seen to have started decelerating in December, a Bangko Sentral ng Pilipinas official said.

“This December, we’re expecting (the growth rate) to start slowing down... as the adjustments to the SDA (Special Deposit Account) have been completed,” BSP Deputy Governor Diwa C. Guinigundo told reporters.

The rise M3, the broadest measure of domestic liquidity, has hit a 10-year high in July last year at 30.1 percent, and this was further sustained in the succeeding months.

The rate was seen reaching a fresh peak of 36.5 percent in November, the highest since December 2001, the oldest data available at the central bank website.

Guinigundo attributed the sustained high growth of domestic liquidity to earlier refinements made by the central bank on its SDA facility and the rising loans on the back of a growing economy.

Official December M3 data will be released by the central bank on Jan. 30.

The BSP earlier cut interest rates on the SDA by 150 basis points last year to a record low of 2 percent. At the same time, it has ordered the removal of 30 percent of singular investment management accounts (IMA) in the facility by July last year.

The complete phase out of the IMA – the singular fund accounts offered usually by banks to retail investors--was implemented in November.

Following these adjustments made on the facility, funds parked in the SDA fell to P1.412 trillion as of Dec. 6 from a record high of P2.2 trillion seen in April.

The central bank’s aim in flushing out money from the SDA was to encourage investors to instead put their funds in other activities or instruments that will benefit the economy.

The BSP last month said it would continue to be watchful of any impact the high growth in M3 may have on inflation and on financial asset prices. 

It added it is ready to implement measures to ensure domestic liquidity conditions are in line with the central bank’s mandate of keeping prices stable and ensuring such is supportive of sustainable economic growth.