MANILA – Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla Jr. on Tuesday said there is no overheating yet of the Philippine economy since fundamentals remain strong and are supportive of sustained domestic expansion.
“We do not believe that we are there yet and we remain very vigilant to avoid it,” he said in his speech during the Security Bank economic forum 2017 held at Makati Shangri La.
The central bank chief cited that, for one, “credit growth is manageable.”
This as some analysts have raised the red flag on the strong growth of bank lending, with the September 2017 figure at 21.1 percent, excluding placements in the BSP’s reverse repurchase (RRP) facility.
Including RRP placements bank lending last September rose by 20.1 percent.
These gauges were at 20.4 percent, net of RRPs, and 17.9 percent including RRPs last August.
Espenilla said bank loans are diversified, with bulk allocated for the productive sectors.
“Credit expansion is still below the established international threshold,” he said, pointing out that this rise is still manageable.
Growth of domestic liquidity, or M3, is also not worrisome because “inflation dynamics remain,” he said.
Rise of real property prices do not also show misalignment from fundamental values, he said.
“We continue to closely monitor growth and risks to overheating even as we stand ready to deploy macroprudential measures if necessary to deal with sectoral issues in a targeted way,” he said.
Meanwhile, the peso is now appreciating against the US dollar but in recent weeks it registered its 11-year lows.
This made some analysts worry about the sustained weakness of the local currency, especially with the expected additional hike in the Federal Reserve rates by December.
Espenilla dubbed these concerns as “overdone”, noting that movements in the exchange rates are normal adjustments.
“We see these as healthy adjustments. The peso is expected to be broadly steady over the medium term, backed by strong underlying fundamentals, ready market access and robust international reserves,” he added.