The expansion in credits to the domestic sector and adjustments in the special deposits accounts (SDA) continue to be the growth driver of the country’s money supply, the Bangko Sentral ng Pilipinas (BSP) said on Monday.
Domestic liquidity, or M3, increased by 31 percent year-on-year at end-September 2013 to reach P6.2 trillion.
“This pace of growth is similar to the revised expansion recorded in the previous month,” the central bank stated.
On a monthly basis, seasonally adjusted M3 was increased by 2 percent month-on-month after expanding by a revised 0.1 percent in August.
Meanwhile, the monetary authority said that claims on the domestic sector grew by 10.6 percent in September from the revised 11.8 percent in July, because of the continued increase in claims on the private sector, “in line with the faster growth in bank lending.”
However, net claims on the central government declined by 11.3 percent for the month, because of the higher deposits of the government reflecting proceeds from the auction of government securities as well as revenue collections from various agencies.
On the other hand, the BSP said that robust foreign exchange inflows from remittances, business process outsourcing receipts, and portfolio investments led to the continued improvement of its net foreign assets (NFA).
The central bank’s NFA grew 7.7 percent year-on-year compared to 9.1 percent in August, while the NFA of banks increased as banks’ foreign liabilities grew faster than their foreign assets.
“Banks’ foreign assets also rose due to the growth in their loans and receivables as well as their investments in marketable debt securities. Banks’ foreign liabilities continued to increase due mainly to higher deposits of nonresidents with local banks,” it explained.
The monetary authority also said that the operational adjustment in its SDA facility also contributed to the M3 increase in September, adding that the M3 growth rates are expected to decelerate once the adjustments have been completed.
Furthermore, the central bank assured that a temporary period of high M3 growth is not expected to fan inflationary pressures.
The central bank said the “latest baseline forecasts of the BSP continue to indicate within-target inflation over the policy horizon.”
Bank sustain growth
Bank lending sustained its expansion as outstanding loans of commercial banks, net of reverse repurchase (RRP) placements with the BSP grew by 15.8 percent in September, up from the 14.2-percent growth registered in August.
Similarly, the growth of bank lending inclusive of RRPs in the same month expanded at a faster rate of 14.6 percent from 13 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 2.3 percent for loans inclusive of RRPs.
Meanwhile, loans for production activities—which comprised more than 80 percent of banks’ aggregate loan portfolio—grew by 14.8 percent in September from 11 percent in August.
The BSP said that the expansion in production loans was driven primarily by increased lending to the real estate, renting and business services; manufacturing; wholesale and retail trade; electricity, gas and water; financial intermediation; and construction. However, the BSP noted that lending to agriculture, hunting and forestry; and transportation, storage and communication continue to decline in September.
The central bank said that consumer loans eased slightly to 10.9 percent from 11.5 percent in the previous month, with the slowdown of credit across all types of household loans, namely credit card receivables, automotive loans and other household loans.
“The continued broad-based growth in bank lending supports the sustained expansion of the productive sectors of the economy,” it added.