Money supply and bank lending growth both accelerated in August due to strong credit demand, the Bangko Sentral ng Pilipinas (BSP) reported on Friday.
Domestic liquidity or M3 expanded by 15.4 percent year on year — faster than July’s revised 13.5 percent — to P10.1 trillion. Month-on-month and seasonally adjusted, M3 growth was 1.8 percent.
“Demand for credit remained the principal driver of money supply growth,” the central bank said. It added that the expansion was “consistent with the BSP’s prevailing outlook for inflation and economic activity.”
Domestic claims grew by 16.9 percent, up from the 15.7 percent posted in July.
The bulk of bank loans during the month went into real estate activities; electricity, gas, steam and air-conditioning supply; wholesale and retail trade; repair of motor vehicles and motorcycles; manufacturing; information and communication; other community, social, and personal activities; agriculture, forestry and fishing; and financial and insurance activities.
Joey Cuyegkeng, senior economist of ING Bank Manila said the strong demand for credit could also be attributed to the government’s proposed tax reforms.
“The acceleration may also partly reflect some frontloading of purchases ahead of the implementation of the tax reform package that not only includes lower individual income tax and higher excise taxes for fuel, sweetened beverages but more directly higher excise taxes on automobiles,” he said.
Lending to the public sector, meanwhile, grew faster by 16.7 percent from 13 percent due to increased national government borrowings.
Net foreign assets (NFA) in peso terms also saw growth surge to 6.4 percent from July’s 2.7 percent.
The central bank said its own NFA position continued to expand on the back of foreign exchange inflows coming mainly from overseas Filipinos’ remittances, business process outsourcing receipts and portfolio investments.
The NFA of banks increased as their foreign assets expanded at a faster pace due to higher loans and investments in marketable debt securities.
Bank lending growth, meanwhile, accelerated to 20.4-percent from July’s 19.7 percent.
Including reverse repurchase placements (RRPs) with the central bank, lending growth slowed to 17.9 percent from 18.7 percent in the previous month. Month-on-month and seasonally-adjusted, commercial bank lending increased by 1.8 percent and 0.8 percent, respectively, for loans net of RRPs and loans inclusive of RRPs.
Lending for production activities, which accounted for over 88.5 percent of the aggregate loan portfolio, grew by 19.5 percent, faster than July’s 18.9 percent.
This was driven by real estate activities that increased by 18 percent; electricity, gas, steam and air conditioning supply (23.7 percent); wholesale and retail trade, repair of motor vehicles and motorcycles (15.2 percent); manufacturing (13.1 percent); information and communication (38.1 percent); other community, social, and personal activities (127.7 percent); agriculture, forestry and fishing (36.7 percent); and financial and insurance activities (12.5 percent).
“Bank lending to other sectors also increased during the month except in administrative ad support services activities, which declined by 24.5 percent,” the central bank said.
Loans for household consumption expanded by 22.8 percent compared with July’s 22.3 percent on the back of increases in auto loans, credit card loans, salary-based general-purpose loans, and other types of household loans.
“Going forward, the BSP will continue to ensure that the expansion in domestic credit and liquidity conditions proceeds in line with overall economic growth while remaining consistent with the BSP’s price and financial stability objectives,” the central bank said.