Money growth slows to 23% in June

MANILA, Philippines - Domestic liquidity continued to decline in June following adjustments made by the Bangko Sentral ng Pilipinas on the banks’ reserve requirement ratio.

In a statement, the BSP said M3—the broadest measure of liquidity—grew by 23 percent to P7.07 trillion in June. This was slower than the 28.4 percent expansion in May and the 32.1 percent growth in April.

“As in previous months, the high—though decelerating—M3 growth reading in June continued to reflect in part the decline in the special deposit account (SDA) placements of trust entities compared to their levels a year ago, in line with the BSP’s operations adjustments in the SDA facility,” the central bank said.

Domestic liquidity growth hit above 30 percent in July last year after the BSP cut the SDA interest rate by 150 basis points earlier in 2013 and ordered investment management accounts in the facility withdrawn by end-November.

The BSP made adjustments on the facility to flush out funds and encourage investors to put them in other instruments benefitting the economy.

“The adjustments in reserve requirements as well as in the interest rate on the SDA facility that were implemented earlier are expected to help bring domestic liquidity growth in line with levels consistent with the pace of expansion of the real sector,” the BSP said.

Earlier this year, the central bank raised the banks’ reserve requirement ratio by two percent and the SDA rate by 25 basis points to bring down the relatively high liquidity growth.

M3 growth slid below 30 percent for the first time in 10 months in May.

For the following month in June, M3 expansion was still driven by a sustained demand for domestic credit. Domestic claims rose 13 percent to P6.38 trillion in June, reflecting a steady climb in lending to the private sector.

“The bulk of bank loans during the month was channeled to real estate, renting, and business services, utilities, wholesale and retail trade, manufacturing, as well as the agriculture sector,” the BSP said.