Money supply growth picks up pace in March, hits 5-month peak

MONEY SUPPLY expanded faster in March to a five-month peak even as growth in bank lending slowed, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

More money circulated in the domestic economy as liquidity grew by 14.4% from a year ago, picking up from the 13.5% pace logged in February and logging the fastest rate seen since October 2017.

Domestic liquidity or M3, which stands as the broadest measure of money in an economy, reached P10.9 trillion as of end- March. Month on month, money supply actually increased by 1.3%.

Funds from local sources went up by 14.2% for the month, faster than the 13.8% logged in February supported by a sustained rise in bank credit, the central bank said in a statement.

Net claims on the central government also posted a 6.5% rise, compared to a 3.7% increase the previous month due to increased borrowings made by the state.

The government issued $230 million worth of renminbidenominated papers during its maiden issuance of the so-called panda bonds on March 20.

On the other hand, net foreign assets expressed in peso terms posted faster growth at 6.4% versus the 4.6% clocked in February. A steady stream of dollar inflows from overseas Filipinos’ remittances, business process outsourcing revenues, and foreign portfolio investments supported a stronger position maintained by the BSP.

Foreign assets held by banks also rose on the back of higher investments in debt papers, the central bank added.

“The overall pace of growth in M3 remains consistent with the BSP’s prevailing outlook for inflation and economic activity,” the BSP said in a statement.

CREDIT GROWTH EASES

On the flip side, bank lending eased in March to log the slowest pace in over a year.

Credit growth slowed to an 18.3% rise for the month coming from February’s 19.5%, the central bank said, posting the weakest increase since February 2017.

Factoring in the reverse repurchase agreements availed by banks, lending went up by 18.8% coming from 17.6% a month prior.

Majority of the loans went to fund production activities to account for 88.4% of the total. These credit lines grew by 18.1% in March from 18.6% previously, with the biggest increase in lending extended to other community, social and personal activities which jumped by 83.1%.

Other sectors which received bigger loan lines include information and communication (27.9%); electricity, gas, steam and airconditioning supply (23.7%); real estate activities (18.6%); wholesale and retail trade, repair of motor vehicles and motorcycles (17.6%); and financial and insurance activities (17.1%).

Other sectors received bigger credit except for administrative and support services, which saw borrowings plummet by 37.9%, and the agriculture sector with an eight percent drop in lending, according to BSP data.

Consumer lending also softened in March as retail lines grew by 19.3%, slower than the 19.9% climb in February on the back of declines in some household loans and slower increases in motor vehicle and salary-based borrowings, the central bank said.

The central bank monitors liquidity and bank lending dynamics to ensure price and financial stability, as several observers have flagged potential overheating in the economy due to rapid loan growth.

Central bank officials have said that the rapid loan growth seen in the local scene simply supports more upbeat domestic economic activity, particularly with the government’s infrastructure spending push.