Private sector, gov’t urged to ramp up investments

The Bangko Sentral ng Pilipinas (BSP) has urged the government and the private sector to increase investments in the country and take advantage of growing liquidity in the banking sector as well as potential drop in interest rates.

The BSP expects banks to remain highly liquid in 2012, and this gives them enough appetite to lend and help fund expansion plans of private firms or their investments in major public infrastructure projects.

For the government, the BSP said it would pay to push through with its planned capital-intensive infrastructure projects expected to spur economic growth.

Under the government’s Public-Private Partnership (PPP) program, private firms may invest in public infrastructure projects.

Moreover, the BSP said, expected declines in interest rates would make bank loans cheaper.

“Given liquidity levels, having a viable outlet is important. Having these outlets build capacity for future needs is even better,” BSP Governor Amando Tetangco Jr. said Friday in an e-mail to reporters.

Tetangco added that the government is also encouraged to spend for infrastructure projects to help increase demand and overall economic activity.

He also said that banks are capable of lending to contractors wanting to pursue big-ticket projects.

“We have previously suggested that the economy can benefit from further fiscal spending as this relates to the build-up in productive capacity,” Tetangco added.

That the banks have excess liquidity is seen in their over-a-trillion worth of funds parked at the BSP’s special deposit account (SDA) facility.

Economists said banks can better help the economy grow by increasing their lending and withdrawing some of their SDA funds.

Credit from banks has already grown by over 20 percent so far this year, but economists said banks can lend even more.

Banking industry players said in response that they have enough appetite to lend some more but that there must be more viable investment projects to finance.

Despite the over-20-percent lending growth seen so far this year and the significant resources of banks, the economy moderated in the first three quarters of this year.

The economy grew by only 3.6 percent in January to September from a year ago, thus the government is likely to miss its 2011 growth target of 4.5 to 5.5 percent.

Last year, the economy grew by 7.6 percent, the fastest in over three decades.

The slowdown this year was blamed both on anemic demand for the country’s exports amid problems of industrialized countries and underspending by the national government.