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BSP’s P1.3-T cash infusion helping right PH economy

By: - Reporter / @daxinq
/ 02:44 PM July 20, 2020

MANILA, Philippines — Cash poured into the local financial system by the central bank continued to help stabilize domestic liquidity conditions and and is helping ensure that money is available to borrowers who need it during the coronavirus pandemic, according to the regulator.

In a statement, Bangko Sentral ng Pilipinas Governor Benjamin Diokno pointed to the latest money supply data which showed a 16.6-percent expansion in May to about P13.7 trillion — the fastest pace of domestic liquidity growth since February of this year.

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“The continued stabilization of domestic liquidity conditions and the improvement in market sentiment has allowed the BSP to gradually reconfigure its monetary operations,” he said. “This will reinforce our prior liquidity-enhancing measures and facilitate their transmission to market interest rates, loan growth and eventually to overall economic activity.”

To date, the central bank’s various measures have released a total of P1.3 trillion into the financial system — equivalent to 6.4 percent of the country’s gross domestic product — to buttress the Philippine economy that is poised to experience its first contraction in decades.

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As this developed, Diokno stressed that the central ban will maintain its dovish stance over the near term until the growth is on surer footing.

“Let me be clear: the BSP is not starting to siphon off the liquidity that it has injected into the market. Not yet,” he said, as he explained that the central bank is making “operational adjustments” in its liquidity mechanisms “to provide better traction on short-term market interest rates while keeping monetary policy accommodative.”

“We remain mindful of the need to reduce borrowing costs to support Filipino businesses and households,” Diokno said.

According to the regulator, bank lending to non-financial corporations and households continue to be a principal driver of liquidity expansion.

Bank lending slowed down in April and May 2020 as the imposition of quarantine measures to contain the spread of the virus impeded economic activity and dampened market sentiment. Nevertheless, as the BSP’s monetary and regulatory measures gain further traction, credit to the private sector is projected to pick up in the coming months with the gradual reopening of the economy, it predicted.

Meanwhile, domestic borrowings by the national government have also become one of the major drivers of domestic liquidity growth. This reflects the impact of the central bank’s measures to restore market confidence to place investible funds in domestic bond issues, such as government securities, and ensure the proper functioning of the financial market, he said.

“As the economy transitions into new operating conditions, the BSP will continue to support the national government’s broader efforts to mitigate the adverse impact of the health crisis,” Diokno said. “The BSP stands ready to deploy appropriate measures as needed to facilitate the recovery of the economy, in line with its mandate to preserve price and financial stability conducive to the balanced and sustainable growth of the economy.”

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TAGS: Bangko Sentral ng Pilipinas, BSP, Governor Benjamin Diokno, Philippine economy
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