GROWTH in money supply as measured by M3—the total amount of cash and cash-equivalent of securities circulating within the economy—slackened in February from a year earlier when growth was at double-digits, but gained some momentum from January this year.
Preliminary data released by the Bangko Sentral ng Pilipinas (BSP)showed that domestic liquidity or M3 in February stood at P7.5 trillion, up 8.5 percent, a sharp slowdown from the 36.6 percent increase recorded a year earlier.
The central bank attributed the year-on-year moderation to the statistical effects brought about by the high baseline set by the 36.6 percent rise achieved in February 2014.
“M3 growth in February 2015 also reflects statistical base effects associated with the significant increase in domestic liquidity a year ago of 36.6 percent, following the operational adjustments involving access of trust entities to the BSP SDA facility, which were completed in November 2013,” it said.
Compared with January’s 7.7 percent increase, growth in February stepped up.
Seasonally adjusted, M3 in February rose only 1.4 percent on a month-on-month basis.
The central bank said in a statement domestic liquidity continued to grow at a moderate pace during the month due in part to the increase in placements of trust entities in its special deposit account (SDA) facility relative to a year ago.
Nicholas Antonio Mapa, associate economist at the Bank of the Philippine Islands, said the 8.5-percent increase in M3 during the month was in line with expectations as the base effects from the previous year’s surge to strong double digits will wane toward the midpoint of this year.
“Domestic liquidity continues to expand at a healthy pace… We do expect M3 to settle at a more normalized pace of 15 percent after base effects wear away,” he added.
Demand for credit
Focusing on the 8.5 percent increase, the BSP also said money supply continued to rise on the back of sustained demand for credit, although the central bank acknowledged that domestic claims grew at a slightly slower pace in February.
Domestic claims grew by 10 percent in February, slowing from 10.8 percent in January as credits to the private sector expanded at a broadly similar 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 manufacturing, wholesale and retail trade, real estate, renting, and business services, utilities, and financial intermediation.
By contrast, the BSP data also showed lending for the public sector contracted 4.5 percent after declining by 2.2 percent in January “as deposits of the national government continued to increase due mainly to the revenue collections of various agencies,” the BSP explained.