BSP: Philippines weighed down by too much liquidity

1:56 am | Friday, September 7th, 2012

The Philippines may have emerged on the radar screen of foreign portfolio investors, but it is now being weighed down by too much liquidity in its financial system, the Bangko Sentral ng Pilipinas.

The rise in the inflow of foreign portfolio capital and growth in internal resources of the country’s financial system may be welcome, but they also have their fair share of risks, BSP Governor Amando Tetangco Jr. said.

According to the BSP chief, while rising liquidity in the system makes the local financial sector vibrant, the presence of excess cash may lead to unmanageable inflation.

“For us [BSP], there is that added issue of domestic liquidity that is building up and looking for suitable outlets. Some say it is a positive problem that is preferable to the case of liquidity drying up. That may be true, but to central bankers, it is still a concern, positive or otherwise,” Tetangco said Thursday in a speech during a banking forum organized by The Asian Banker.

With too much money in the financial market, economists said, investors may engage in excessive speculative investment activities, such as on currency, which can destabilize the economy in general.

Too much money also may cause banks to lend carelessly, even to borrowers who may not be considered credit-worthy.

High liquidity may also lead to an increase in demand for various products, thereby fueling faster inflation, Tetangco said.

The BSP chief said that the monetary authority is prepared to implement more measures to ensure that the Philippine financial system will not suffer from the destabilizing effects of growing liquidity.

Recently, the BSP issued a rule prohibiting foreign funds from being deposited in the central bank’s special deposit account (SDA) facility, where placements earn yields.

Tetangco said the BSP is keen on maintaining a stable financial system in the Philippines.

The BSP earlier reported that net foreign portfolio investments hit a net inflow of over $900 million in July—about three times more than the estimated $300 million posted in the same period the previous year.

Moreover, placements in SDA facility of the BSP recently hit a record high of P1.8 trillion.

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Tags: Bangko Sentral ng Pilipinas , Finance , Foreign portfolio investments , liquidity , Philippines

http://profile.yahoo.com/4KYVQQFDVJKU2TNK5RGDCNW3WM george

will this translate into an improved well-being of the Filipinos who need the most?
http://pulse.yahoo.com/_YAYZCQ4KSBQRKR2LLGX5XRMXFI pepe

EKONOMIYA GUMAGANDA PERO DI MAPANSIN NG GOBYERNO NI YELLOW NA NAGTATAASAN DIN MGA PRESYO NG MGA BASIC COMMODITIES PERO SAHOD NG MGA MANGAGAWA SA PRIVATE SECTORS HINDI PA TUMATAAS… ANG MGA
GANID NA MGA NEGOSYANTE NAGPAPASAHOD LANG NG LESS P4K/MONTH KUNG AYAW SA SAHOD PINAPALAYAS TUTAL MARAMI NAMAN DAW NAGHAHANAP NG TRABAHO…. PUTSA!
jopar

Why is it that I got this hunch that it is the govt.’s being over cautious preventing PHL from leaping forward?

We are always scared of everything. But I have not heard of any industrialized country that did not take substantial risks before achieving their tiger economy status.

In the first place, one can never be a tiger if it moves like a chicken.

redfullmoon

because sudden growth is not always a good thing, at least not for consumers like you and me who may have a difficult time of it keeping up with rising costs as it is. China experienced the same thing and their government had a hard time keeping consumer costs down (and social unrest down as well). you must also consider that once costs also go up to unmanageable levels, foreign firms who opt to move their operations here may consider otherwise.
wisdom would say that a steady pace of growth – where everybody can adjust accordingly — is better and healthier than unsustainable booms.
redfullmoon

btw our central banks are better managed than some countries in Europe, so I wouldn’t complain. also, we don’t want our economy to overheat like China’s. we all lose in the end.

http://profile.yahoo.com/FWD5IDZT7SXOEHKLE3O7CGFOAE Bright

Salamat po Mr Tetangco. Continue on to look for the PHL economy and make sure to have a conservative approach on all matters just to be safe.
pugadlawin

if there is so much money, you should have provision how much should
be placed in physical public investments such roads, bridges, sewage system, ports, airports etc.

The issue now with infra is ”WAG PO KURAKUTIN!”
http://pulse.yahoo.com/_OJWHBJLMWPTRUOZMN6JOMHLO2A Banana Na

yan, ang sinasabi ng HOT MONEY, in other countries, they can put their money for only three months if they don’t invest it on otheir opening business or stock markets, they just cannot put their money in the bank, jan, nag=uumpisa ng speculation sa currency at papaano mo bibigay ng interest sa kanila sa daming pera nila nilagay sa bank….
http://www.facebook.com/oustcorona ILL_HIT_YOUR_FACE

Excess cash? Should that be a problem?! There were a lot People who would like to take a loan for their business ideas..
rickysgreyes

The banks should provide more loans to the micro SMEs

BSP: Philippines weighed down by too much liquidity

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