M3, lending edge up on production growth

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Feb money supply up 12.6%, lending up 18.1

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THE amount of money circulating in the financial system registered double-digit growth in February as domestic claims eased and bank lending for production continued to expand, the central bank said.

Data released by the Bangko Sentral ng Pilipinas (BSP) on Friday showed that domestic liquidity, or M3, rose at a faster pace of 12.6 percent to P9.433 trillion in February from a revised estimate of 12.3 percent in January.
Seasonally adjusted month-on-month, M3 grew 1.2 percent.

Bank lending increased by 18.1 percent in February, led by loans for production activities and household consumption. Growth stepped up from 17.9 percent in January.

“Demand for credit remains the principal driver of money supply growth,” the central bank said in a statement released with the figures.

“M3 remains consistent with the prevailing outlook on inflation and economic activity.”

Domestic claims–the sum of net claims on central government and claims on other sectors–rose 15.8 percent, slightly down from 15.9 percent in January.

The bulk of bank loans went into real estate; financial and insurance activities; wholesale and retail trade and repair of motor vehicles and motorcycles; manufacturing; and electricity, gas, steam and air-conditioning supplies.

Lending to the public sector climbed 17.3 percent, “as a result of increased borrowings as part of the NG [national government]cash operations and continued withdrawal by the NG of its deposits with the BSP.”

Net foreign assets (NFA) in peso terms grew 7.2 percent, compared with an 8.7 percent increase in January, the central bank said, without detailing the factors behind the slowdown.

It only said its own NFA position continued to expand due to robust foreign exchange inflows, coming mainly from overseas Filipinos’ remittances and business process outsourcing receipts.

The NFA of banks expanded as foreign assets grew faster on higher interbank loans and investments in marketable debt securities, it added.

Lending for production up

Growth in bank lending at 18.1 percent in February was supported by loans for production activities and household consumption. Comparative growth in January was 17.9 percent.

Including reverse repurchase placements (RRPs) with the central bank, lending increased 17.5 percent in February from 16.2 percent the previous month.

Seasonally-adjusted month-on-month, commercial bank lending rose 1.5 percent for loans net of RRPs, and by 1.8 percent for loans that included RRPs.

Lending for production activities, which comprised 89.1 percent of the aggregate loan portfolio, grew 17.6 percent from 17.5 percent in January.

This was driven primarily by real estate activities, which grew by 17.1 percent; financial and insurance activities, up 28.4 percent; wholesale and retail trade, and repair of motor vehicles and motorcycles, up 13.9 percent; manufacturing, up 11 percent; electricity, gas, steam and air-conditioning supply, up 14.2 percent; and information and communication, up 40 percent.

“Bank lending to other sectors also increased during the month, except in the case of public administration and defense, compulsory social security (-7 percent).” the central bank said.

Loans for household consumption grew 24.6 percent, gaining pace from 23.7 percent in January, “due to the expansion in credit card loans, as well as sustained growth in salary-based general-purpose loans, offsetting the decline in other types of household loans.”

The BSP said it 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.

Earlier, Fitch Ratings said loan growth in 2017 is likely to rise to the mid- to high-teens, with most of the increase in lending coming from higher demand for funds for infrastructure, real estate and other business investment purposes.

“Continued strong credit growth could generate concerns of overheating, and potential credit bubbles, but we believe that the authorities will be able to adjust policy to address these risks, including the implementation of macroprudential policy measures,” Fitch said in an earlier report.

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