M3’s Nov rise mild despite RRR cut
THE growth of cash circulating in the local economy grew faster in November, but remained at a single-digit pace despite the release of cash due to the recent reserve requirement ratio (RRR) cuts.
The Bangko Sentral ng Pilipinas (BSP) reported on Wednesday that domestic liquidity—broadly measured as M3—expanded by 9.8 percent to about P12.4 trillion in November 2019, faster than the 8.5-percent growth in October.
At this level, the BSP vowed to “monitor domestic liquidity dynamics to ensure that overall monetary conditions remain in line with maintaining the BSP’s price and financial stability objectives.”
A growing cash supply is often beneficial for an expanding economy such as the Philippines, as it provides fuel to the productive sectors of the country.
However, an excessively slow growth in M3 could be detrimental to the country’s overall growth, especially if it is not enough to fuel the productive activities in the economy. An excessively high cash supply growth, meanwhile, could stoke inflationary pressures and pull prices upward for the economy.
In October 2019, the BSP announced a fresh cut to the banks’ RRR, marking the fourth RRR cut during the year.
Loans for production activities—which comprised 87.2 percent of banks’ aggregate loan portfolio, net of RRPs—expanded at a rate of 8.1 percent in November,
higher than the reported growth in October at 7.5 percent.
The sustained increase in production loans was driven primarily by lending to the following sectors: real- estate activities (19.3 percent); financial and insurance activities (15.3 percent); construction (29.1 percent); and electricity, gas, steam and airconditioning supply (7.6 percent).
Bank lending to other sectors also increased during the month, except those to manufacturing
(-2.3 percent), mining and quarrying (-10.8 percent), professional, scientific and technical activities (-16.6 percent), and other community, social and personal activities (-35.7 percent). Meanwhile, loans from universal and commercial banks for household consumption grew by 26.6 percent in November from 26.7 percent in October, due to faster growth in motor vehicle loans during the month.
Bianca Cuaresma