• Sept M3 growth slows to 16.2%

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    GRAPHLiquidity levels seen moderating further

    The country’s money supply grew further in September on the back of the domestic economy’s sustained demand for credit, but at a slower pace of 16.2 percent year-on-year compared with the preceding month’s 18.3 percent expansion, the central bank said.

    Domestic liquidity or M3—which measures the total amount of cash and cash-equivalent of securities circulating within the economy—reached P7.2 trillion in September.

    Measured against the increase in August, the seasonally adjusted M3 in September rose 0.3 percent, compared with the previous month’s 0.7 percent growth, data from the Bangko Sentral ng Pilipinas (BSP) released on Friday showed.

    The central bank said it expects domestic liquidity growth to further moderate to levels consistent with domestic demand, as previous monetary adjustments continue to work their way through the economy.

    The M3 indicator has been on a decline since January this year at 37.3 percent, except from July to August, which showed a slight increase from 17.9 percent to 18.3 percent.

    In a bid to mop up excess liquidity from the financial system, the Monetary Board of the BSP hiked the reserve requirement ratio for banks to 20 percent at its May 8 meeting. On September 11, the policy-setting body raised the rate paid on the special deposit account facility by 25 basis points to 2.50 percent from 2.25 percent.

    At its October 23 meeting, the Monetary Board decided to keep the 2.5 percent interest rate for SDA and the 20-percent RRR for banks unchanged.

    “Going forward, the BSP remains prepared to take appropriate action as necessary to ensure that liquidity conditions continue to be consistent with the BSP’s objective of maintaining price and financial stability,” the central bank said.

    Domestic claims in September increased by 16 percent from 14.6 percent in August, reflecting in part the sustained expansion in credits to the private sector, the BSP said.

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

    At the same time, public sector credit rise 12.9 percent in September from the revised 5.5 percent in August, as the deposits of the national government with the central bank increased at a slower pace, “due largely to the withdrawal of funds by the NG [national government]for the redemption of maturing government securities,” the BSP said.

    Net foreign assets, or the net position of the central bank relevant to transactions with non-residents, grew 3.9 percent in peso terms, the central bank concluded.

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