Money supply growth slightly slowed down in April; lending expands

MANILA, Philippines — Money supply growth slightly slowed down in April while bank lending grew at a faster pace, the Bangko Sentral ng Pilipinas reported.

A little less money circulated in the economy as domestic liquidity expanded by 14.2 percent year-on-year in April, a tad sluggish than the 14.4 percent growth clocked in the previous month.

M3, or the broadest measure of money supply in the financial system, reached P10.9 trillion as of end-April. On a month-on-month seasonally-adjusted basis, M3 increased by 1.0 percent.

Domestic claims grew by 16.4 percent in April, higher than the 14.5-percent increase in March due to sustained growth in bank lending.

Meanwhile, dollar inflows from overseas Filipinos’ remittances, business process outsourcing receipts and foreign portfolio investments boosted net foreign assets expressed in peso terms, which surged by 4.2 percent year-on-year from 5.6 percent a month ago.

“Overall domestic liquidity conditions remain broadly in line with the BSP’s prevailing outlook for inflation and economic activity,” the central bank said.

“Nevertheless, the BSP will continue to closely monitor domestic liquidity to ensure that monetary conditions are conducive to maintaining price and financial stability,” it added.

Last March, monetary authorities introduced a one percentage point cut in the amount of reserves lenders need to park with the central bank, a move that could inject about P90 billion in the economy.

Weeks after tweaking policy rates, the BSP announced another one percentage point reduction of the reserve requirement ratio effective June 1, pumping close to P100 billion into the financial system to support the country’s growing economy.

Bank lending expands

Separately, the BSP said credit growth jumped 19.9 percent in April from 18.5 percent in March.

Computed to include reverse repurchase agreements entered into by banks, lending surged 19.9 percent from 18.8 percent.

Loans for production activities—which comprised 88.5 percent of banks’ aggregate loan portfolio—grew at a quicker pace to 19.6 percent from 18.2 percent.

However, growth of loans for household consumption decelerated to 19.0 percent in from 19.8 percent.

“The slower increase in credit card loans and motor vehicle loans as well as the contraction in other types of household loans offset the faster expansion in salary-based general purpose consumption loans in April,” the central bank said.

The BSP watches money supply level as too much credit could fuel demand that may stoke inflation and financial bubbles. Bank lending growth in the Philippines remains in double digit, fueling concern of overheating.