THE ECONOMY is far from overheating with rising credit growth accompanied by increased domestic activity, the Bangko Sentral ng Pilipinas (BSP) said in the minutes of its latest policy meeting wherein it noted that rapid bank lending should not cause alarm for now.
The BSP’s policy-setting Monetary Board said double-digit increases in bank lending and money supply have not been worrisome so far, allowing authorities to keep interest rates unchanged in their review last month.
“[A]s credit for production activities continues to expand in line with output growth, the economy’s improving absorptive capacity is likewise seen to be sustained, thus mitigating inflation pressures over the long run,” read the highlights of the Monetary Board’s Sept. 21 policy meeting that were published yesterday.
The BSP had then decided to keep policy rates steady on the back of manageable inflation and firm domestic activity. The central bank kept the key policy rate at 3.0%, the overnight deposit rate at 2.5% and the overnight lending rate at 3.5%.
“Firm” domestic economic activity alongside positive consumer and business sentiment made the case for keeping rates on hold during the central bank’s sixth monetary policy review this year, with overall economic growth seen intact over the medium term.
The Philippine economy expanded by 6.4% last semester, with economic managers seeing a boost to growth this semester as more infrastructure projects go live.
BSP Governor Nestor A. Espenilla, Jr. has said that the government’s 6.5-7.5% growth goal remains “attainable”, thus far, with conditions proving supportive of an upbeat economic outlook.
Money supply picked up by 13.5% in July while bank lending surged by 19.7% — levels considered “supportive” of current policy settings.
Domestic liquidity growth grew by 20.4% in August, according to latest BSP data.
Increased lending activity will not push consumer prices upward, the central bank said, with fresh liquidity instead poured into productive uses across “key economic sectors” and households.
Government spending also remains “on track,” with disbursements up by 11% year-on-year in the seven months to July.
Meanwhile, inflation averaged 3.1% in the nine months to September, slightly below the central bank’s 3.2% forecast average for the entire year but well within the 2-4% target range.
On the other hand, the BSP said that “broadly upbeat” prospects for global economic growth provide some lift to external trade which could further boost the Philippine economy, although geopolitical tensions and lingering uncertainty on the timing of rate hikes among advanced economies like the US pose risks to demand abroad. — Melissa Luz T. Lopez