M3 growth rises, bank lending slows

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MONEY supply growth rose in October amid slower bank lending, the Bangko Sentral ng Pilipinas (BSP) reported on Tuesday.

Domestic liquidity or M3 expanded by 14.8 percent year on year—slightly faster than September’s 14.5 percent—to P10.26 trillion. Month-on-month and seasonally adjusted, M3 growth was 1.3 percent.

“The growth in M3 remains consistent with the BSP’s prevailing outlook for inflation and economic activity,” the central bank said in a statement.

Domestic claims growth slowed to 15.2 percent from 16.1 percent in September as credit to the private sector eased to 16.5 percent from 18.3 percent in the previous month.


“Nevertheless, growth in bank loans remained robust on account of lending to key production sectors such as electricity, gas, steam and air-conditioning supply; real estate activities; wholesale and retail trade, repair of motor vehicles and motorcycles; financial and insurance activities; information and communication; and manufacturing,” the Bangko Sentral said.

Net foreign assets (NFA) in peso terms, meanwhile, grew by 6.1 percent year-on-year in October from the previious month’s revised 0.1 percent.

The central bank said its own NFA position increased in October, reflecting foreign exchange inflows coming mainly from overseas Filipinos’ remittances and business process outsourcing receipts.

The NFA of banks, meanwhile, increased as foreign assets expanded as a result of higher loans and investments in marketable debt securities

Lending moderates

Bank lending growth, meanwhile, moderated to 19.9 percent from September’s 21.1 percent.

Including reverse repurchase placements (RRPs) with the central bank, lending growth slowed to 18 percent from 20.1 percent in the previous month. Month-on-month and seasonally-adjusted, commercial bank lending increased by 0.8 percent for loans net of RRPs but declined by 0.4 percent for loans inclusive of RRPs.

Lending for production activities, which accounted for over 88.3 percent of the aggregate loan portfolio, grew at a slower rate of 18.7 percent from September’s 20.7 percent.

This was driven by electricity, gas, steam and air-conditioning supply (25 percent); real estate activities (16 percent); wholesale and retail trade, repair of motor vehicles and motorcycles (19.9 percent); financial and insurance activities (24.5 percent); information and communication (40.4 percent); and, manufacturing (9.4 percent).

Bank lending to other sectors also increased during the month except in public administration, defense and compulsory social security (-1.1 percent), and administrative and support services activities (-22.2 percent), the central bank said.

Loans for household consumption accelerated to 23.4 percent compared with September’s 20 percent as “expansion in credit card loans, motor vehicle loans and other types of household loans compensated the slower growth in salary-based general purpose loans.”

“Going forward, the BSP will continue to ensure that the expansion in domestic credit and liquidity conditions proceeds in line with overall economic growth while remaining consistent with the BSP’s price and financial stability objectives,” the central bank said.

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