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DOMESTIC
liquidity or M3 continued to expand in February,
although at a slower pace than the month before, driven
lower by risk aversion as foreign-fund inflows were
spooked and started digesting the impact of the US
subprime woes.
This
corresponded with the period when the special deposit
account (SDA) facility of the Bangko Sentral ng
Pilipinas (BSP), reworked later in March, was still in
place and should have diminishing impact on M3 levels.
But M3
growth for the month averaged only 6.6 percent from 7.2
percent in January, and slower than year-ago growth of
22 percent.
“The
slowdown in the growth of domestic liquidity [may] be
traced to both the decline in net domestic asset and the
slowdown in the growth of net foreign assets,” deputy
BSP Governor and officer in charge Armando L. Suratos
said in a statement.
From the
monetary policy perspective, the slowed-down M3 growth
strengthens the case against adjustments in current
policy settings due for another revisit two weeks hence.
Suratos
reported net foreign assets having grown by only 16.7
percent versus 20.3 percent the previous January as a
result of the decline in the net foreign assets of other
depository corporations.
The net
foreign assets of other depository corporations showed a
net outflow month-on-month of P20.2 billion in February.
The same
also showed a month-on-month outflow of P51.5 billion
for the period.
Suratos
also reported sustained expansion in private-sector
credit to 10.1 percent, from 7.7 percent the previous
month.
“Credit
extended to the public sector also rose by 11.6 percent
as lending to the national government picked up at 17.6
percent, even as lending to local government units and
other public entities continued to decline,” he said.
The net
domestic assets in February fell for the seventh month
in a series as the net other items, which include
liquidity-sapping SDAs and repurchase papers of the BSP,
posted a negative balance as a result of
liquidity-management measures implemented in May 2007.
Slower
M3 growth, while positive in terms of inflationary
impact, potentially means slower growth this year
targeted to hit 6.3 percent.
In any
case, the BSP vowed to closely monitor domestic
liquidity developments to ensure there is enough to
attain the growth objective and keep the momentum in the
right direction.
At the
same time, the BSP vowed to keep a keen eye on the risks
to inflation and remain in position to implement
appropriate and timely policy responses. |
