June money supply up 5.1%

The country’s money supply grew by 5.1 percent in June from a year earlier, faster than a 3.7 percent rise in May, mainly due to an expansion in private credit, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

“The central bank shall continue to keep an eye on domestic liquidity trends to ensure that liquidity growth is supportive of non-inflationary economic growth,” BSP Governor Amando M. Tetangco Jr. said.

The money supply data, one of several indicators used by the central bank in setting its policy on rates, was based on a new reporting system that is consistent with international accounting standards.

Credit to the private sector expanded 11.8 percent in June from a year ago from 8.6 percent in May while credit to government agencies slowed to two percent in June from 4.9 percent in the previous month.

Annual inflation has risen to a 17-year high of 12.2 percent in July but is unlikely to reach 13 percent this year, with the peak coming possibly in October, the BSP previously said.

Annual domestic liquidity rose 17.4 percent in 2007, below the central bank’s 20 percent threshold.

Driven by the significant expansion in private credit, the BSP reported that the growth of net domestic assets (NDA) returned to positive territory in June, as it posted a 1.5 percent growth, from the negative growth rates recorded starting in August 2007. 

The Net Other Items account (which includes SDAs and RRPs) remained in negative balance, the BSP said. 

Credit extended to the private sector picked up further in June to reach 11.8 percent from the 8.6 percent increase recorded in May. Meanwhile, credit extended to the public sector continued to grow but at a slower pace of 2.0 percent in June from 4.9 percent in the previous month.

The BSP said the slowdown in public sector borrowing resulted from the relatively slower growth of credit extended to the National Government (NG) and the decline in loans to local governments and other public entities.

The BSP said domestic money supply could grow by an average of 14 to 15 percent this year under its old reporting system, without creating these inflationary pressures and officials said the current money supply level was enough to support growth. – Des Ferriols