Monetary Policy to Support Growth

Article excerpt

The Bangko Sentral ng Pilipinas (BSP) will continue to adopt a ''supportive'' monetary stance this year to prevent the fragile economy from going into a tailspin as projected by some economists.

BSP Deputy Governor for research and treasury Amando Tetangco Jr. disclosed that domestic liquidity, otherwise known as M3, will be allowed to maintain its 15 percent growth for this year.

This would be similar to the 15 percent expansion assumed by the BSP last year calculated to maximize the economic growth momentum.

However, because of a series of negative events that befell the government last year, there was a slight deceleration in economic activities, resulting to a slower demand for money.

Against a 15 percent expansion in domestic liquidity, the BSP reported that M3 expanded by only 10.7 percent as of October.

"Domestic liquidity will be allowed to grow by 15 percent, if there is demand for money," Tetangco said.

Heightened demand for domestic liquidity is assumed as businessmen are expected to abandon their "wait and see" attitude once the political crisis has been resolved during the early part of the new year.

For this year, the authorities assumed the gross domestic product to expand at a range of between 3.0 percent to 3.5 percent.

Moreover, Tetangco said the BSP is projecting the country's gross international reserves to further improve this year to a best case scenario of $16 billion.

The worse case is to maintain the GIR at end December level of $14. …