January money supply grows at 38.6 percent

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The country’s money supply grew at a faster rate in January as banks lent more to the productive sectors of the economy, reflecting the upbeat business environment in the Philippines.

Domestic liquidity or M3 increased by 38.6 percent year-on-year at end-January 2014 hitting P6.9 trillion, faster than the 32.7-percent expansion recorded in December 2013, according to the Bangko Sentral ng Pilipinas (BSP).

Meanwhile, bank lending in January expanded by 17.1 percent from 16.4 percent in December 2013.

The central bank said money supply continued to expand from higher demand for credit in the domestic economy.


Domestic claims rose by 16.2 percent in January from 11.6 percent in December 2013, as banks loans for production activities expanded further by 16.2 percent in January from 15.3 percent in December.

These loans—which comprised more than four-fifths of banks’ aggregate loan portfolio—expanded further by 16.2 percent in January from 15.3 percent in December.

The BSP attributed the expansion in production loans to the increased lending to manufacturing, utilities, wholesale and retail trade, as well as financial and business services.

The data showed loans to real estate, renting and business services went up by 17.3 percent; electricity, gas and water increased by 29.6 percent; wholesale and retail trade expanded by 16.2 percent; manufacturing rose to 12.7 percent; other community, social and personal services went up by 46.5 percent; while lending to transportation, storage and communication declined by 3.3 percent.

“These sectors provide large multiplier effects to the real sector,” the central bank said.

Similarly, loans for household consumption grew at a faster pace of 8.9 percent from 8.3 percent in the previous month, as credit card loans and other types of loans like personal loans and salary loans expanded.

Public sector credit climbed by 15.2 percent because of withdrawals by the national government of its deposits with the BSP to fund the redemption of bonds and spending on public works projects.

“The sustained growth momentum of credit reflects the stable financial conditions and continued solid growth prospects of the domestic economy. Going forward, the BSP will continue to watch evolving credit and liquidity conditions closely to ensure that bank lending growth continues to reflect the pace of domestic demand while at the same time maintaining overall price and financial stability,” the central bank said.

Furthermore, the BSP said that it would continue to assess the medium-term impact of strong M3 growth on the outlook for inflation as well as on financial prices.

The monetary authority also remains prepared to deploy all necessary measures to ensure that liquidity conditions continue to be in line with its objective of maintaining price and financial stability conducive to sustainable economic growth.

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