Tight liquidity? BSP brass unconvinced

Inflation-wary central bank officials remain unconvinced the Philippine financial system is suffering from tight liquidity even with the latest data showing a marked slowdown in bank lending growth—a key indicator of economic activity.

In an interview last week, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said financial institutions have made known their concerns on the liquidity situation, as evidenced by the slowdown in bank loan growth to only 9.9 percent in March, but noted other central bank officials saw the picture differently.

“I’ve been discussing this with bankers indeed, and they are complaining about the tightness in the financial system,” he told ABS-CBN News Channel in an interview on the sidelines of last week’s Asian Development Bank annual meetings in Fiji. “When we discussed this with our people, they had other views.”

This disagreement between market players and policymakers would be threshed out and resolved when the Monetary Board convenes to decide on the direction of interest rates on Thursday, May 9, he said.

According to the central bank, outstanding loans of universal and commercial banks, net of reverse repurchase placements with the BSP, grew at a slower rate of 9.9 percent in March from 13.7 percent in February.

Likewise, the growth in bank lending inclusive of short-term placements decelerated to 9.3 percent in March from 13.9 percent in the previous month.