The growth of the country’s money supply slowed down in December 2013 on the account of the adjustments made in the special deposit account facility of the Bangko Sentral ng Pilipinas (BSP).
BSP data on Thursday showed that domestic liquidity or M3 eased to 32.7 percent year-on-year at end-December from the 36.5 percent recorded in the previous month.
Month-on-month, seasonally-adjusted M3 also decreased by 1.5 percent, reversing the 4.4-percent revised growth in the previous month.
“The slower pace of increase in money supply is consisted with the expected normalization of M3 growth over the coming months following the completion of the operational adjustments in the BSP special deposit account facility in November 2013,” the central bank explained.
Meanwhile, the BSP data showed that the sustained expansion of credits to the domestic economy remains to be the growth driver of the country’s money supply.
Domestic claims grew by 11.6 percent in December from 12.3 percent a month ago, supported by the continued increase in claims on the private sector, which grew 17.3 percent, reflecting the steady growth in bank lending.
Furthermore, the level of net claims on the central government was broadly steady relative to its level a year ago.
The BSP data also showed that its net foreign assets (NFA) managed to expand but at a slower pace of 10.1 percent year-on-year.
“The BSP’s NFA position improved on the back of continued robust foreign exchange inflows coming mostly from overseas Filipinos’ remittances, and BPO [business process outsourcing]receipts,” the central bank stated.
NFA of banks also increased as banks’ foreign assets foreign assets rose at a faster pace relative to the growth in their foreign liabilities.
“Banks’ foreign assets expanded due mainly to the growth in foreign loans and receivables, while banks’ foreign liabilities rose on account of higher deposits and placements of foreign banks with local banks,” the BSP said, noting that placements of foreign banks with their local branches continue to decline.
Bank lending expands
Bank lending continue to expand in December as outstanding loans of commercial banks, net of reverse repurchase (RRP) placements with the BSP were recorded at 16.4 percent from 14.8 percent growth in the previous month.
The BSP said that the growth of bank lending inclusive of RRPs in the same month expanded at a faster pace of 16.3 percent from 13.8 percent in the previous month.
On a month-on-month seasonally adjusted basis, commercial bank lending increased by 2.8 percent for loans net of RRPs and by 3.4 percent for loans inclusive of RRPs.
Meanwhile, loans for production activities expanded by 15.3 percent in December from 13.2 percent in November, comprising more than four-fifths of banks’ aggregate loan portfolio.
“The expansion in production loans was driven primarily by increased lending to the following sectors: real estate, renting, and business services; electricity, gas and water; manufacturing; wholesale and retail trade; and construction,” the BSP stated.
However, lending to transportation, storage and communication; and other community, social and personal services recorded declines during the month.
Loans for household consumption grew by 8.3 percent from 9 percent in the previous month, reflecting the slowdown in the growth of auto loans and other types of loans.
“The continued expansion in bank lending is expected to support the continued positive outlook of the domestic economy for the year ahead.
Going forward, the BSP will ensure that credit and liquidity conditions will keep at pace with overall economic growth while remaining consistent with its price and financial stability objectives,” the BSP said.