Credits to the domestic economy continue to be the growth driver of the country’s money supply, which went up to P6.7 trillion in November, data from the Bangko Sentral ng Pilipinas (BSP) showed.
BSP data showed that domestic liquidity or M3 recorded a year-on-year 36.5-percent expansion at end-November, moderately faster than the 32.5-percent expansion in the previous month.
Month-on-month, seasonally adjusted M3 increased similarly at a faster pace of 4 percent from 2.1 percent (revised) in the previous month.
“Money supply growth was driven largely by the sustained expansion in domestic claims, or credits to the domestic economy,” the central bank stated, noting that domestic claims grew by 12.3 percent in November from 11.6 percent a month ago.
The BSP said that the growth in domestic claims can be attributed to the continued increase in claims in the private sector, which grew 18 percent reflecting the steady growth in bank lending.
On the other hand, net claims on the central government rose modestly by 0.9 percent for the month, largely as a result of the increase in credits to the national government.
The BSP data also showed that its net foreign assets (NFA) improved by 10.9 percent year-on-year on the back of robust foreign exchange inflows from overseas Filipinos’ remittances, business process outsourcing receipts and portfolio investments.
NFA of banks also increased as banks’ foreign assets foreign assets rose at a faster pace relative to the growth in their foreign liabilities.
“Banks’ foreign assets expanded due mainly to the growth in foreign loans and receivables, while banks’ foreign liabilities rose on account of higher deposits and placements of foreign banks with local banks. It was also noted that placements of foreign banks with their local branches have declined,” the BSP said.
The monetary authority also said that the operational adjustment in its special deposit account facility also contributed to the M3 increase in November.
Bank lending recovers
Bank lending also recovered in November as outstanding loans of commercial banks, net of reverse repurchase (RRP) placements with the BSP, were recorded at 14.8 percent from the 13.6-percent growth in the previous month.
The BSP said that the growth of bank lending inclusive of RRPs in the same month expanded at a faster pace of 13.8 percent from 13.5 percent in the previous month.
On a month-on-month seasonally adjusted basis, commercial bank lending increased 1.5 percent for loans net of RRPs and by 0.6 percent for loans inclusive of RRPs.
Meanwhile, loans for production activities expanded by 13.2 percent in November from 12.3 percent in October, which comprised more than four-fifths of banks’ aggregate loan portfolio.
“The expansion in production loans was driven primarily by increased lending to the following sectors: real estate, renting and business services; electricity, gas and water; wholesale and retail trade; manufacturing; and construction,” the BSP stated.
However, lending to transportation, storage and communication; financial intermediation; and public administration and defense recorded declined in November.
Meanwhile, loans for household consumption grew by 9 percent from 11.2 percent in the previous month, reflecting the slowdown in the growth of credit card loans.
“The continued expansion in bank lending is expected to support the sustained growth of the domestic economy. Going forward, the BSP will ensure that credit and liquidity conditions constantly keep pace with overall economic growth while remaining consistent with its price and financial stability objectives,” the BSP said.