Mopping up operations trim M3 growth to 9.6%

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m3The central bank’s mopping up operations trimmed the growth in money supply last December to 9.6 percent from 30 percent observed in the early part of last year.

Data from the Bangko Sentral ng Pilipinas showed that the December increase in liquidity was a bit higher than the revised 9.2 percent expansion in November.

Domestic liquidity or M3—which measures the total amount of cash and cash-equivalent of securities circulating within the economy—reached P7.6 trillion in December. The seasonally adjusted M3 in December contracted by 0.7 percent on a month-to-month basis.

The central bank said the deceleration in M3 growth during the month could be attributed in part to the increase in placements of trust entities in the BSP’S special deposit account (SDA) facility relative to a year ago.

Besides the mopping up operation done by the monetary authority in early 2014, BSP Governor Amando Tetangco Jr. said that the decelerating growth of domestic liquidity can also be traced to base effects.


“If you look at the longer term trend, the M3 is really coming from a relatively high base. Remember in the early part of 2014, the M3 is growing by over 30 percent , so its adjusting now,” Tetangco said to reporters on the sidelines of the Security Bank Economic Forum 2015 held in Makati City.

Despite the decelerating growth pace of money supply, the BSP governor said that there are still enough liquidity in the system to support economic activity in the country.

“There’s sufficient structural liquidity. Meaning if any investor need to borrow for a capital investment or operating cost then the funds are in the banks,” he explained.

Demand for credit sustained

The BSP said money supply’s expansion was due largely to the sustained demand for credit.

Domestic claims in December rose 16.2 percent from 18 percent in November, reflecting largely the continued expansion in credits to the private sector, the BSP said.

The bulk of the bank loans during the month were channeled into key production sectors such as real estate, renting, and business services, utilities, wholesale and retail trade, financial intermediation, manufacturing, and transportation, storage, and communication.

At the same time, public sector credit rose 22.1 percent in December from 19.6 percent in November, “as deposits of the national government [NG] with the BSP increased at a slower pace due largely to the withdrawal of funds by the NG for the redemption of maturing government securities.”

Meanwhile, net foreign assets, or the net position of the central bank relevant to transactions with non-residents, grew at a faster pace of 4.8 percent in peso terms, the central bank also noted.

“Going forward, the BSP will continue to monitor monetary developments closely and remains prepared to take appropriate measures if needed to ensure that liquidity conditions are consistent with its price and financial stability objectives,” the central bank said.

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