MONEY supply and bank lending grew at a slower pace in July from the previous month, Bangko Sentral ng Pilipinas (BSP) data showed Friday.
Domestic liquidity or M3 expanded by 11.8 percent to P8.7 trillion in August from a year earlier, but slower compared with 13.1 percent in July. Month-on-month, M3 decreased by 0.2 percent.
The central bank did not explain why M3 and bank lending grew slower in August, other than saying that “demand for credit continued to fuel money supply growth.
An analyst downplayed the moderation, noting the latest data reflect ample liquidity in the Philippine financial system to support economic activity.
“The recent data shows that the domestic financial system remains awash with cash as liquidity continues to grow to help support the demands of the growing economy,” Bank of the Philippine Islands (BPI) associate economist Nicholas Antonio Mapa said.
The strength of bank lending also shows that on top of having funds available, demand for credit remains vibrant as investors and consumers take advantage of still subdued borrowing costs for expansionary activity, Mapa noted.
“The economy remains very well supported and fundamentals wise we are a runaway winner in the region whose majority is constrained by higher borrowing costs, inflation and weak confidence,” he added.
Domestic claims grew by 14.9 percent from 16.5 percent “on the back of sustained increase in credits to the private sector,” the central bank said.
Net claims on the central government rose by 18.2 percent from 25.4 percent as a result of deposit withdrawals by the national government from the BSP.
Net foreign assets (NFA) in peso terms increased by 8.8 percent from 12.5 percent, the central bank said. Its own NFA position continued to expand on the back of robust foreign exchange inflows mainly from remittances, business process outsourcing receipts, and portfolio investment.
The NFA of banks increased as foreign assets expanded from deposits with other banks and investments in marketable debt securities.
“The data suggests that the expansion in M3 remains manageable and consistent with ensuring non-inflationary growth,” it said.
Slower lending pace
Bank lending fell slightly August, expanding at a slower pace of 17.3 percent from 17.7 percent in July.
Including reverse repurchase placements (RRPs) with the central bank, lending grew by 15.9 percent in the same comparable period.
Lending for production activities, which accounted for over 80 percent of the aggregate loan portfolio, grew by 17.3 percent, slightly slower than 17.4 percent in July.
“Bank lending to other sectors likewise expanded during the month, except for mining and quarrying (-1 percent); water supply, sewerage, waste management and remediation activities (-0.6 percent); and, public administration and defense, compulsory social security (-5 percent),” the central bank said.
Loans for household consumption accelerated by 20.3 percent from 20.6 percent, reflecting salary-based general-purpose, credit card, and motor vehicle loans which offset the decline in other types of household loans.
The BSP it will continue to ensure that domestic credit and liquidity conditions are at pace with overall economic growth while remaining consistent with its price and financial stability objectives.