BSP: Poor spending, poor exports growing economy

HERE’S a puzzler: The factors that pulled down last year’s growth—low export activities and government underspending—are now the very same ones pushing the economy to greater heights.

This, according to Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. in a spot interview on Wednesday at the Mandarin Oriental Hotel in Makati City where he also said bank lending continued to expand in May averaging 14.7 percent from April when this grew at an accelerated pace of 19.2 percent.

While bank lending moderated during the period, Tetangco said this only proved the current monetary-policy settings remain supportive of continued economic expansion down the line.

This also proved that the level of liquidity in the system best shown by so-called domestic liquidity or M3 in the month of May remain adequate to support the funding requirements of borrowers, he added.

According to the BSP governor, commercial-bank loans have been growing at double-digit rates the past 21 months in a row.

So-called production loans, or those granted various manufacturing units, wholesalers, utilities firms and other big corporate borrowers, grew by 14.7 percent in May from 19.7 percent in April.

Car, credit-card, housing and personal loans also eased to 16.8 percent from 17.5 percent in April.

Continued bank-lending growth “supports the favorable outlook for domestic demand amid tepid global economic conditions,” Tetangco said.

Money-supply growth remained driven by sustained growth in the net foreign assets averaging 9.6 percent in May.

Tetangco said the central bank’s net foreign-assets position grew by 11.6 percent on the back of steady foreign-exchange inflows from overseas remittances and portfolio investments.

But the banks’ net foreign assets continued to ease during the month as their collective foreign liabilities grew faster than their foreign assets.

Continued rise in the banks’ foreign liabilities was traced in part to higher placements and deposits made by foreign banks with their local branches.

Growth in the banks’ net domestic assets slowed to 2.9 percent from 4.6 percent in April due to the faster increase in the net other-items account owing to higher placements of eligible counterparties to the central bank’s special-deposit account or SDA facility.

Also, the slower growth in lending to the private sector contributed to moderation in liquidity growth during the month.

Basically for these reasons, Tetangco said, target inflation ranging from 3 percent up to 5 percent this year was likely to settle at the low end of the range. –Jun Vallecera, Businessmirror