BOTH money supply and bank lending expanded as loans for households and businesses grew in June, the Bangko Sentral ng Pilipinas (BSP) said on Monday.
Domestic liquidity, or M3, rose by an annual 13.2 percent to P9.87 trillion in June from 11.3 percent in May. Month-on-month growth in M3 was measured at a seasonally adjusted 1.8 percent.
“Demand for credit remained the principal driver of money supply growth,” the Bangko Sentral said in a statement.
Domestic claims grew by 15.4 percent, from 14.3 percent, “due largely to sustained growth in credit to the private sector.”
Bank loans remained strong on account of lending to key production sectors such as real estate activities; electricity, gas, steam and airconditioning supply; manufacturing; wholesale and retail trade; repair of motor vehicles and motorcycles; and information and communication.
Lending to the public sector expanded by 14 percent “as a result of increased borrowings by the national government.”
Banks’ foreign assets expanded on the back of higher loans and investment in marketable debt securities.
Bank lending grew by 19 percent as loans for production activities and households also expanded.
Lending for production activities, which accounted for over 88.5 percent of the aggregate loan portfolio, grew by 17.9 percent from 17.6 percent.
The central bank said the expansion was driven by real estate activities, which increased by 17.8 percent; electricity, gas, steam and air-conditioning supply (24.9 percent); manufacturing (11.6 percent); wholesale and retail trade, and repair of motor vehicles and motorcycles (11.6 percent); and information and communication (35.5 percent).
“Bank lending to other sectors also increased during the month,” the central bank said.
Loans for household consumption grew by 22.5 percent compared with 23.6 percent.
“Going forward, the BSP will continue to ensure that domestic credit and liquidity conditions proceeds in line with overall economic growth while remaining consistent with BSP’s price and financial stability objectives,” the central bank said.
A Metropolitan Bank & Trust Co. (Metrobank) analyst said bank lending will continue to grow as the economy expands.
“We expect industry loan growth to remain in the high teens as the economy continues with its current high-growth trajectory,” Metrobank research head Marc Bautista said.
The Philippine government has set a growth target of between 6.5 percent and 7.5 percent in 2017, and 7 percent to 8 percent for 2018. In 2016, the economy grew by 6.9 percent.
“In general, brisk lending is directly related to robust domestic economic activity while the said M3 growth is also a direct result of the high growth in lending. This is because loans generate deposits and therefore, additional money supply, so this is very much an expected outcome,” Bautista said.