BSP: Money in circulation expands 9.7% in September

Domestic liquidity (M3) expanded in September, albeit at a slower pace than the previous month, data released by the Bangko Sentral ng Pilipinas (BSP) on Wednesday showed.

M3—the broadest measure of money circulating in the financial system— expanded by 9.7 percent to P11.157 trillion.

In August, liquidity increased by 10.4 percent to P11.154 trillion from P10.106 billion in the same month in 2017.

Higher lending activities were recorded in September, the central bank noted, saying the borrowers mainly used their funds for production.

Loans for production activities were driven key sectors such as:

• real estate

• construction

• manufacturing

• wholesale and retail trade financial and insurance activities

• motor vehicles and motorcycles repair

• electricity, gas, steam,

and air conditioning supply

Cid Terosa, dean at University of Asia and the Pacific’s School of Economics, said higher domestic liquidity means more funds for economic activities. “It means greater money in circulation for various economic and business activities.”

He noted, however, that more money circulating in the financial system could further accelerate inflation.

“Well, greater liquidity has its pros and cons. It can add pressure to inflation if production can’t keep pace with demand,” Terosa said.

Current conditions remain supportive of growth, the BSP said.

“The BSP is of the view that overall liquidity conditions remain supportive of the country’s growth requirements,” it said in an emailed statement.

“The BSP will continue to closely monitor domestic liquidity dynamics to ensure that monetary conditions remain conducive to price and financial stability,” it said.