PH sustains liquidity growth, bank lending in June

MANILA, Philippines – Growth in money supply – the total amount of money in circulation – eased slightly in June after it hit a 5-month high in May.

The Bangko Sentral ng Pilipinas (BSP) said on Friday, July 31, domestic liquidity or M3 went up by 9% year-on-year to P7.7 trillion ($168.99 billion) in June 2015, moderately easing from the 9.3% expansion seen the month before.

M3 is the broadcast measure of money within an economy. This may include time and demand deposits, as well as currency circulating outside of the banks.

“Money supply continued to expand due largely to sustained demand for credit,” the Philippine central bank said in a statement.

Domestic claims continued to increase, growing by 10.8% in June from 9.7% in May, with both public and private sector credit expanding.

“The bulk of bank loans during the month was channeled to key production sectors such as real estate activities, electricity, gas, steam, and airconditioning supply; wholesale and retail trade, and repair of motor vehicles and motorcycles; manufacturing; and financial and insurance activities,” the BSP said.

But the growth in net foreign assets (NFA) in Philippine peso moderately eased to 8% in June from a month before’s 8.3%.

“The BSP’s NFA position continued to expand during the month on the back of robust foreign exchange inflows coming mainly from overseas Filipinos’ remittance and business process outsourcing receipts,” the central bank said.

In June, the BSP said liquidity growth remained supportive of the Philippine economy’s growth requirements.

Sustained growth in bank lending

Meanwhile, outstanding loans of commercials banks – net of overnight borrowings with the BSP – grew by 14.5% to P4.60 trillion ($100.95 billion) in June, a separate statement from the central bank showed.

Loans for production activities went up by 14.5% in June, easing from the 14.1% expansion seen in May.

These loans comprise more than 80% of banks’ loan portfolio.

Growth in production loans were driven by key sectors: real estate activities (16.3%), electricity, gas, steam and airconditioning supply (28.9%), wholesale and retail trade, and repair of motor vehicles and motorcycles (15.1%), manufacturing (8.6%) and financial and insurance activities (14.4%).

BSP said this trend “will continue to ensure that domestic credit and liquidity conditions will keep pace with overall economic growth while remaining consistent with its price and financial stability objectives.”

Money supply and lending growth are key indicators the central bank studies when setting interest rates because of their impact on inflation. – Rappler.com

$1= P45.56

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