DOMESTIC liquidity in June as measured by M3—representing the total amount of cash and cash-equivalent circulating within the economy—rose 9 percent year-on-year to P7.7 trillion, an indication that liquidity remains sufficient to sustain the economy’s growth requirements, the central bank said on Friday.
Data released by the Bangko Sentral ng Pilipinas (BSP), however, showed that M3 slowed in June from the 9.3 percent rise posted in May.
Measured month-on-month and as seasonally adjusted, M3 slipped 0.3 percent.
Focusing on the year-on-year comparison, the BSP said money supply continued to expand on the back of sustained demand for credit, with domestic claims in June growing grew from a month ago.
Key production gets bulk of loans
Domestic claims increased 10.8 percent in June from a revised 9.7 percent in May, with credits to the private sector up at a faster pace relative to the previous month, the BSP said.
The bulk of the bank loans during the month were channeled into key production sectors such as real estate activities, electricity, gas, steam, and airconditioning supply; wholesale and retail trade and repair of motor vehicles and motorcycles; manufacturing; and financial insurance activities.
The BSP data also showed lending for the public sector rose by 1.6 percent after contracting by a revised 3.4 percent in May.
“Going forward, the BSP will continue to keep a close eye on monetary dynamics to ensure that liquidity in the financial system remains consistent in maintaining price and financial stability objectives,” the BSP added.
Think tank sees M3 muted in H2
In their joint The Market Call report, think tanks First Metro Investments Corp. (FMIC) and the University of Asia and the Pacific (UA&P) said growth in the country’s money supply is likely to maintain a moderate pace in the last six months of 2015.
“Money growth remains muted and should continue to be or near single-digit rates in the second half,” they said.
“With very soft inflation rates, there appears to be some leeway for a slight easing [in domestic liquidity]in the second half via lower reserve requirements for banks,” the report added.
Headline inflation in the first half of this year averaged 2 percent, touching the lower end of the 2 percent to 4 percent target of the central bank.
The reserve requirement ratio for banks, on the other hand, has been kept by the BSP at 20 percent since May last year.