M3 growth slows in Sept

MANILA, Philippines - Domestic liquidity growth decelerated in September, reflecting the Bangko Sentral ng Pilipinas’ recent adjustments in banks’ reserve requirements and special deposit account rate.

M3—the broadest measure of liquidity—expanded by 16.2 percent to P7.204 trillion in September, slower than the revised 18.3 percent growth recorded in the previous month.

The increase in money supply is amid the sustained demand for loans in the domestic economy, BSP data showed.

Domestic claims went up 16 percent to P6.588 trillion in September. The bulk of the loans went into the wholesale and retail trade; utilities; real estate, renting, and business services; manufacturing; and financial intermediation activities.

Public sector loans climbed 12.9 percent to P1.03 trillion as the deposits of the government with the BSP went up at a slower pace versus the withdrawal of funds for the redemption of maturing government securities.

Net foreign assets, meanwhile, increased 3.9 percent to P3.709 trillion in September.

“Domestic liquidity growth is expected to further moderate to levels consistent with domestic demand, as previous monetary adjustments continue to work their way through the economy,” the BSP said.

The BSP earlier raised the banks’ reserve requirement ratios by 200 basis points and the SDA rate by 25 basis points to 2.25 percent in order to pull down the relatively high liquidity growth.

M3 growth reached 30 percent in July last year and remained above that threshold after the central bank reduced the SDA rate by 150 basis points last year and restricted deposits of investment management accounts or the singular fund accounts offered usually to retail investors in the facility.

Discouraging investments in the SDA was done so funds would be put instead to other activities and instruments beneficial to the growth of the economy.