Money supply growth picks up pace in March

MONEY SUPPLY continued to climb in March from a year ago due to sustained demand for credit, the Bangko Sentral ng Pilipinas (BSP) said on Thursday.

M3 — the broadest measure of money within an economy — growth accelerated to 9.4% to P7.7 trillion last month from the 8.5% pace recorded in February.

The latest result showed domestic liquidity increased by 2.1% on a monthly basis, but was still significantly slower than the 1215% M3 growth deemed “normal” by monetary authorities.

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

“Domestic liquidity growth accelerated during the month due in part to the slower increase in placements of trust entities in the BSP’s special deposit account ( SDA) facility relative to the previous month,” it said. “The M3 growth in March 2015 also reflects statistical base effects associated with the significant increase in domestic liquidity a year ago of 35.3%, following the operational adjustments involving access of trust entities to the BSP SDA facility…”

Of the money in circulation, domestic claims grew by 10.4% in March to P6.987 trillion from a year ago as bank lending accelerated.

“The bulk of bank loans during the month was channelled to key production sectors such as real estate, renting and business services, manufacturing, wholesale and retail trade, financial intermediation and utilities,” the BSP noted.

Meanwhile, net foreign assets ( NFA) jumped by 8.3%, faster than the 7.3% or P3.804-trillion expansion recorded the previous month.

“The BSP’s NFA position expanded during the month, after contracting since July, 2014, on the back of continued robust foreign exchange inflows coming mostly from overseas Filipinos’ remittances and business process outsourcing receipts,” the BSP said. “The NFA of banks likewise increased as banks’ foreign assets increased due mainly to the growth in their investments in marketable debt securities and deposits with other banks, while their foreign liabilities decreased on account of lower placements made by foreign banks with their local branches.”

“The continued expansion in domestic liquidity during the month indicates sufficient liquidity to sustain the economy’s growth momentum,” the central bank added.

BANK LENDING SLOWS

In a separate statement also issued yesterday, the BSP reported that growth in outstanding loans of universal and commercial banks, net of their reverse repurchase placements, eased to 13.7% in March to P4.389 trillion from February’s 15.2% pace.

Of the total, production loans, which comprised 80% of banks’ aggregate loan portfolio, expanded by 13.3% to P3.916 trillion last month, slower than the 14.5% growth recorded in February.

The BSP noted that the growth in production loans was driven primarily by lending to real estate, renting and business services (10.1%); manufacturing (11.4%); wholesale and retail trade (12.6%); electricity, gas and water (14.2%); and financial intermediation (19.3%).

Loans for household consumption, meanwhile, expanded by 18.8% to P339.665 billion — slower than February’s 21.1% pace — which the BSP attributed to continued growth in credit card, auto and other types of loans.

“Going forward, the BSP will continue to ensure that credit and liquidity conditions remain supportive of overall economic growth in a manner consistent with the BSP’s price and financial stability objectives,” the central bank said.

Money supply and lending growth are among the key indicators the BSP reviews when setting interest rates because of their impact on inflation. —