NextGen Day

An economist stated on Thursday that the growth of domestic liquidity, or M3, is expected to stay in the mid-single digits in the foreseeable future. He said that surplus money in the system is being sucked out through, among other places, the various central bank facilities.

According to Michael Ricafort, chief economist at Rizal Commercial Banking Corporation (RCBC), when both the public and private sectors participate in fund-raising activities to finance their operations and projects, the ongoing reopening of the domestic economy boosts M3 growth and bank lending.

He added that the Bangko Sentral ng Pilipinas (BSP) facilities, such as the weekly term deposit facility (TDF) auction and the sale of the 28-day securities, serve to offset these liquidity enhancements.

He claimed that, among other things, the volume offering for the 28-day bills was boosted on October 28 from PHP70 billion to PHP100 billion.

Last November 25, the BSP increased the offering to PHP120 billion, however it was undersubscribed because only PHP109.469 billion in tenders were received.

The peso’s value versus the US dollar is one goal of the central bank’s excess liquidity mopping operations, according to Ricafort. Another goal is to address the high inflation rate, which escalated last October to its highest level since December 2008, when it reached 7.7 percent.

M3 expanded by 5.4 percent in October of last year, faster than September’s 5.2 percent but less rapidly than the 8.3 percent growth seen in September.

According to Ricafort, “in the coming months, M3 growth could remain at mid-single digit levels as seen in recent months, amid easing base/denominator effects, offset by increased weekly siphoning of excess liquidity through the BSP’s term deposit facility (TDF) auctions in recent months and introduction of the BSP securities auction since September 18, 2020.”

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