SP officer-in-charge Diwa Guinigundo said domestic liquidity or M3 may grow between 10 and 11 percent this year with the expected reduction in the level of liquidity banks are required to keep with the central bank.
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BSP sees double-digit growth in liquidity
Lawrence Agcaoili (The Philippine Star) - January 14, 2019 - 12:00am

MANILA, Philippines —   Liquidity in the financial system may post a double-digit growth this year after the tightening cycle by the Bangko Sentral ng Pilipinas (BSP) last year to prevent inflation from spiraling out of control.

BSP officer-in-charge Diwa Guinigundo said domestic liquidity or M3 may grow between 10 and 11 percent this year with the expected reduction in the level of liquidity banks are required to keep with the central bank.

Guinigundo said monetary authorities are reviewing their inflation and growth forecasts to factor in latest developments with the impending cut in the reserve requirement ratio (RRR).

“We are redoing our forecasts of inflation and growth to guide future action on RRR,” he said.

Latest data showed the broadest measure of money in the economy grew by 8.4 percent to P11.25 trillion in end-November last year from P10.38 trillion in end-November 2017.

The BSP has reduced the RRR twice last year to 18 percent from 20 percent, releasing around P190 billion in additional liquidity in the financial system to support the growing economy.

The first reduction that took effect last March 2 injected P90 billion in fresh funds into the system followed by another 100 basis point cut last June 1 that poured around P100 billion in additional liquidity into the economy.

Inflation accelerated sharply to 5.2 percent last year from 2.9 percent in 2017 due to higher oil and food prices as well as the weak peso. It peaked at 6.7 percent in September and October but eased to a six-month low of 5.1 percent in December.

Joseph Incalcaterra, chief economist for Asean at British banking giant HSBC, said in the bank’s latest global research the BSP is seen keeping interest rates steady this year, while slashing the reserve requirement ratio by 300 basis points.

“We expect the BSP to cut the RRR by 300 basis points in 2019, with the first cut as early as 2Q19, to inject more liquidity in the financial system and support growth,” Incalcaterra said.

BANGKO SENTRAL NG PILIPINAS DIWA GUINIGUNDO DOMESTIC LIQUIDITY
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