The expansion in credits to the domestic sector and adjustments in the special deposits accounts (SDA) facility continue to be the growth driver of the country’s money supply, the Bangko Sentral ng Pilipinas (BSP) said on Monday.
BSP data said that domestic liquidity, or M3, increased by 30.9 percent year-on-year at end-August 2013 to reach P6 trillion following a growth of 30.1 percent in July 2013.
On a monthly basis, seasonally adjusted M3 was broadly unchanged after expanding by 8.5 percent (revised) month-on-month in July.
The BSP noted that claims on the domestic sector grew by 11.7 percent in August from 11.3 percent in July, because of the continued increase in claims on the private sector, “in line with the faster growth in bank lending.”
However, net claims on the central government declined by 3.1 percent in August because of the higher deposits of the government reflecting proceeds from the issuance of the 10-year Retail Treasury Bonds on August 15, 2013.
Meanwhile, the BSP said that robust foreign exchange inflows from remittances and business process outsourcing receipts, led to the continued improvement of its net foreign assets (NFA).
The central bank’s NFA position was steady at 9.1 percent y-o-y compared to 9.3 percent in July, while the NFA of banks contracted as banks’ foreign liabilities grew faster than their foreign assets.
“Banks’ foreign liabilities continued to increase due mainly to higher placements and deposits of foreign banks with local banks. Banks’ foreign assets also rose due to the growth in their loans and receivables as well as their investments in marketable debt securities,” it explained.
The BSP also said that the operational adjustment in its SDA facility also contributed to the M3 increase in August, adding that the M3 growth rates are expected to decelerate once the adjustments have been completed.
Furthermore, the central bank assured that a temporary period of high M3 growth is not expected to fan inflationary pressures.
“Latest baseline forecasts of the BSP continue to indicate within-target inflation over the policy horizon amid the stronger pace of growth in domestic liquidity in the coming months,” the central bank said, citing its latest baseline forecasts, which suggests that inflation will remain manageable over the policy horizon even with the stronger pace of growth in domestic liquidity in the new few months.
Bank lending up
Bank lending sustained its expansion as outstanding loans of commercial banks, net of reverse repurchase (RRP) placements with the BSP grew by 14.2 percent in August, up from the 12.3-percent growth registered in July.
In a statement, the BSP said that similarly, the growth of bank lending inclusive of RRPs in the same month expanded at a faster rate of 13 percent from 11.7 percent in the previous month.
On a month-on-month seasonally adjusted basis, commercial bank lending in August increased by 1.8 percent for loans net of RRPs, and by 1 percent for loans inclusive of RRPs.
Meanwhile, the central bank added that loans for production activities—which comprised more than 80 percent of banks’ aggregate loan portfolio—grew by 13.1 percent in August from 11 percent in July.
It said that the expansion in production loans was driven primarily by increased lending to the real estate, renting and business services; wholesale and retail trade; electricity, gas and water; manufacturing and construction. However, the BSP noted that lending to agriculture, hunting and forestry continued to decline in August, recording only 10.5-percent growth.
Meanwhile, the central bank data showed that consumer loans eased slightly to 11.5 percent from 12.3 percent in the previous month, with the slowdown of credit across all types of household loans, namely credit card receivables, automotive loans and other household loans. It added that the sustained expansion in bank lending, particularly to productive sectors, is expected to support the growth momentum of the economy.
“Going forward, the BSP will continue to closely monitor credit and liquidity conditions to ensure that the monetary environment remains consistent with its price and financial stability objectives,” it added.