MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) reported yesterday that the amount of money circulating in the domestic economy grew at a faster pace of 7.2 percent in January from 6.3 percent in December.
BSP Governor Amando Tetangco Jr. said the country’s domestic liquidity or M3 amounted to P4.48 trillion as of end-January this year or P304 billion higher than the year-ago level of P4.179 trillion.
Tetangco said the amount of money circulating in the financial system last January was P194 billion lower than the end-December level of P4.674 trillion.
Data showed that the net foreign assets (NFA) grew 13.1 percent to P3.32 trillion in end-January from P2.936 trillion as foreign assets of the BSP increased by 18.2 percent to P3.302 trillion from P2.794 trillion due largely to sustained foreign exchange inflows from overseas Filipino remittances as well as foreign portfolio investments or “hot money’ and foreign direct investments (FDIs).
On the other hand, the NFA of banks fell 86.1 percent to P19.778 billion from P141.9 billion as foreign loans of banks rose due to the decrease in assets such as foreign debt securities held to maturity by banks.
Meanwhile, the net domestic assets (NDA) retreated by 4.9 percent to P2.231 trillion from P2.347 trillion given the faster expansion in the net other items account including revaluation and capital and reserve accounts as well as special depository account (SDA) placements of trust entities.
“The steady expansion of domestic credits on account of higher private and public sector borrowings combined with the slower rise in the placement of authorized counterparties in the BSP SDA facility also contributed to the acceleration in domestic liquidity growth,” Tetangco said.
Tetangco said authorities would continue to closely monitor monetary conditions to ensure that funds are available to support non-inflationary growth.
“The steady growth in domestic liquidity indicates that liquidity in the financial system can amply fund the economy’s growth requirements,” he added.
Liquidity growth is one of the important vehicles considered in determining the central bank’s monetary policy. At a time when the economy is booming and money supply is expanding rapidly, the central bank would normally step in to mop-up in order to ensure that inflation would not surge.
Last year, the BSP raised the reserve requirement ratio for banks by a combined 200 percentage points bringing the level to 21 percent from 19 percent to curb additional inflationary pressures arising from excess domestic liquidity.
However, the BSP is set to slash the reserve requirement ratio by 300 basis points to 18 percent from the current level of 21 percent starting April 6 to cushion the negative impact of amendments to its reserve requirement policy.
The move is expected to free at least P100 billion worth of funds to the financial system. - By Lawrence Agcaoili