Money supply expands slower in September

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) reported yesterday domestic liquidity growth eased in September but remains sufficient to support the country’s economic growth.

Data released by the central bank showed money supply grew 8.5 percent to P7.83 trillion in September from P7.22 trillion in September last year.

The growth, however, was slower compared to the nine percent expansion registered in August.

BSP Governor Amando Tetangco Jr. said money supply continued to expand due largely to sustained demand for credit which is enough to support the country’s economic expansion.

“The continued expansion of domestic liquidity during the month indicates that money supply remains sufficient to support economic growth,” he said.

According to BSP data, domestic claims grew 12.4 percent in September from 13 percent in August.

 “Credits to the private sector increased at a slightly slower pace relative to the previous month,” Tetangco said.

The BSP chief said net public sector credit rose faster at 15.4 percent in September from 14.5 percent in August.

Net foreign assets (NFA) in peso terms grew at a slower pace of 6.9 percent in September from 7.9 percent in August.

 “The BSP’s NFA position continued to expand during the month on the back of robust foreign exchange inflows coming mainly from overseas Filipinos’ remittances and business process outsourcing receipts,” he said.

Tetangco also said the NFA of banks increased as their foreign assets expanded at a faster pace relative to that of their foreign liabilities.

 “Bank’s foreign assets increased due largely to the growth in their investments in marketable debt securities, while banks’ foreign liabilities grew mainly on account of higher deposits and placements made by foreign banks with other banks,” he said.

The country’s gross domestic product (GDP) grew faster at 5.6 percent in the second quarter from the revised five percent in the first quarter on the back of higher government spending.

This brought GDP growth to 5.3 percent in the first half, slower compared to 6.4 percent in the same period last year.

The country’s economic managers penned a GDP growth of seven percent to eight percent this year.

 “Going forward, the BSP will continue to monitor monetary conditions closely to ensure that liquidity in the financial system remains consistent with the BSP’s price and financial stability objectives,” Tetangco said.

The BSP has kept interest rates unchanged for eight straight policy-setting meetings since October last year. The overnight borrowing rate is currently pegged at four percent while the overnight lending rate is at six percent.

Monetary authorities raised interest rates by 50 basis points last year and increased the reserve requirement ratio for banks to 20 percent as part of tightening measures and to siphon off excess liquidity in the financial system.