M3 slows to 8.5% in July from 9.3% in June
Domestic liquidity in the Philippines as measured by M3 registered slower annual growth in July than in the preceding month, although the pace remained brisk at above 8 percent due to sustained demand for credit during the period, the central bank said on Friday.
Data released by the Bangko Sentral ng Pilipinas (BSP) showed M3 – the xxxx – rose 8.5 percent to P7.7 trillion in July, but indicated a deceleration from the revised 9.3-percent surge recorded in June.
The BSP gave no explanation for the easing of growth in liquidity in July from the rate of
increase the previous month.
It only said money supply continued to expand due largely to sustained demand for credit as domestic claims in July rose from a month earlier.
M3 climbed 0.7 percent measured month-on-month and as seasonally adjusted.
Domestic claims grew 11 percent in July, compared with growth of 10.8 percent in June, with credit to the private sector increasing more slowly relative to the previous month, the BSP said.
The bulk of the bank loans during the month went into key production sectors such as real estate, electricity, gas, steam, and airconditioning supply; wholesale and retail trade and repair of motor vehicles and motorcycles; financial insurance activities; and manufacturing.
Lending to the public sector rose 6.5 percent, stepping up from a revised 1.1 percent increase in June.
“Going forward, the BSP will continue to monitor monetary conditions closely to ensure that liquidity in the financial system remains consistent with the BSP’s price and financial stability objectives,” the BSP said in a statement.
An economist at the Bank of the Philippine Islands (BPI) expressed concern over the slowdown in M3 growth, drawing a parallel to conditions prior to the breakout of the last Asian financial crisis.
“We are quite concerned that M3 growth is slowing while bank loans are accelerating,” BPI lead economist Emilio Neri Jr. said.
Neri was referring to the double-digit 13.5 percent rate of growth in bank lending, against a slowing rise in money supply to 8.5 percent.
The BPI economist said this divergence in growth in bank lending could mean that the banking industry is veering away from the peso and shifting toward foreign currency-denominated intermediation.
“We are by no means worried by some coincidence. This kind of growth divergence in these two indicators (M3 and loan growth) is something [similar to what]we saw prior to the Asian crisis,” he said.