Bank lending fuels continued growth in money supply — BSP

MANILA, Philippines — Money supply continued to expand in February on the back of the sustained growth in bank lending, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

According to preliminary data from the BSP, domestic liquidity – also known as M3 – grew 13.5 percent to P10.72 trillion last February from the P9.45 trillion in the same month last year.

This pace of growth is faster than the 12.8 percent expansion in domestic liquidity the previous month.

The BSP maintained that the growth in money supply remains consistent with its prevailing outlook for inflation and economic activity.

“Nevertheless, the BSP will continue to closely monitor domestic liquidity to ensure that monetary conditions remain conducive to maintaining price and financial stability,” the central bank said.

According to the BSP, sustained credit growth pushed domestic claims to grow 13.8 percent in February, slightly faster than the 13.6 percent increase the previous month.

Net claims on the public sector side also rose 3.7 percent – generally steady from the 3.6 percent revised growth in January – partly because of the continued borrowings of the national government.

Net foreign assets (NFA) in peso terms also grew 4.6 percent, although slower than the 4.9 percent expansion in January. The BSP said this was driven by foreign exchange inflows, coming mainly from overseas Filipinos’ remittances and business process outsourcing receipts.

The NFA of banks also expanded as banks’ foreign assets increased on account of higher loans and investments in marketable debt securities, the BSP added.

Meanwhile, preliminary data from the BSP also showed outstanding loans of commercial banks, net of reverse repurchase (RRP) placements, grew 19.5 percent in February to P7.22 trillion. This represented a slightly faster growth rate than the 19 percent recorded the previous month.

However, growth in bank credit, inclusive of RRPs, decelerated to 17.6 percent in February from 18.4 percent from a month ago.

Loans for production activities – which accounted for 88.4 percent of banks’ aggregate loan portfolio, net of RRP – rose faster at 18.6 percent from 18 percent.

The BSP said the growth in production loans was due to increased lending activities in various sectors, including real estate; electricity, gas, steam and air conditioning supply; wholesale and retail trade, repair of motor vehicles and motorcycles; manufacturing; financial and insurance activities and information and communication.

On the other hand, bank lending to agriculture, forestry and fishing, and administrative and support activities, declined by 11.4 percent and 40 percent, respectively.

Growth in loans for household consumption also slowed down to 19.9 percent in February from 20.2 percent in January.

“The BSP will continue to ensure that the expansion in domestic credit and liquidity proceeds in line with overall economic growth, while remaining consistent with the BSP’s price and financial stability objectives,” the central bank said.