Money supply and bank lending growth both gained pace in July as credit demand strengthened, the Bangko Sentral ng Pilipinas reported on Thursday.
Domestic liquidity or M3 expanded by 13.5 percent in July from a year earlier — faster than June’s revised 13.3 percent — to P9.96 trillion. Month-on-month and seasonally adjusted, M3 growth was 1.4 percent.
“Demand for credit remained the principal driver of the money supply growth,” the central bank said, also noting that money supply remained “in line with the BSP’s prevailing outlook for inflation and economic activity.”
Domestic claims grew by 15.7 percent, up from the 15.4 percent posted in June.
The bulk of bank loans during the month went into real estate activities; electricity, gas, steam and air-conditioning supply; manufacturing; wholesale and retail trade; repair of motor vehicles and motorcycles; and information and communication.
Lending to the public sector grew slower by 13 percent from 14 percent “as a result of increased borrowing by the national government.”
Net foreign assets (NFA) in peso terms, meanwhile, saw growth ease to 2.7 percent from June’s 2.8 percent.
The central bank said, noting that its own NFA position continued to expand on the back of robust 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 resulting from higher loans, and investments in subsidiaries and marketable debt securities.
Bank lending growth, meanwhile, accelerated to 19.7-percent from June’s growth rate of 19 percent.
Including reverse repurchase placements (RRPs) with the central bank, lending growth rose to 18.7 percent in July from 18.3 percent in the previous month. Month-on-month and seasonally-adjusted, commercial bank lending increased by 1.7 percent and 1.4 percent, respectively, for loans net of RRPs and loans inclusive of RRPs.
Lending for production activities, which accounted for over 88.4 percent of the aggregate loan portfolio, grew by 18.9 percent, faster than June’s 17.9 percent.
This was driven by information and communication, which increased by 38.7 percent; electricity, gas, steam and air conditioning supply (27.1 percent); real estate activities (18.9 percent); wholesale and retail trade, repair of motor vehicles and motorcycles (15.1 percent); and manufacturing (12.3 percent).
“Bank lending to other sectors also increased during the month,” the central bank said.
Loans for household consumption expanded by 22.3 percent compared with June’s 22.5 percent on the back of increases in auto loans,credit card loans and salary-based general-purpose loans and as well as the sustained growth in 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 its price and financial stability objectives,” the central bank said.
Metropolitan Bank and Trust Co. Research head Marc Bautista said the latest M3 and bank lending data correlated highly with strong domestic consumption spending.
“Expect lending activity to continue growing at such fast clips given the continuing robust economic growth in the coming quarters,” he said.
“The economy has high absorptive capacity so we don’t see any threats to inflation given such continued growth as well,” he added.
The Philippine economy grew by 6.5 percent in the second quarter, accelerating from 6.4 percent in the first three months of the year.
The second-quarter pace brought year to date growth to 6.4 percent, short of the government’s full-year target of 6.5 percent to 7.5 percent.