Local money supply expands by 7.2 percent

THE Philippines’ money supply grew at a faster pace in November compared to the previous month, the Bangko Sentral ng Pilipinas (BSP) said on Tuesday.

In a statement, the BSP said that domestic liquidity or M3 expanded by 7.2 percent in November from 6.9 percent in October.

On a monthly, seasonally adjusted basis, money supply increased by 0.9 percent from a contraction of 0.7 percent in the previous month.

“The steady growth in domestic liquidity indicates that liquidity in the financial system remains in line with the economy’s growth trajectory. Going forward, the BSP will continue to ensure that monetary conditions remain supportive of economic growth to the extent that the inflation outlook will allow,” BSP said.

As of November, the country’s money supply amounted to P4.4 trillion. Net foreign assets (NFA) of banks continued to grow, albeit at a slower pace of 15.6 percent in November from 17.9 percent in the previous month.

The growth of BSP’S NFA position remained strong at 24.6 percent in November from 31.8 percent in October, driven by steady foreign exchange inflows from overseas remittances and portfolio investments.

However, the NFA of banks decreased further in November because of the continued increase in their foreign liabilities, combined with a decline in their foreign assets.

Banks’ foreign liabilities rose due largely to higher placements made by foreign banks with local banks. The fall in banks’ foreign assets was due in part to the contraction in loan receivables from foreign banks.

Net domestic assets contracted at a slower rate of 7.1 percent in November from the 9 percent decline in October, as the sustained strong expansion in the net other items account was moderated by the acceleration in the growth of net domestic credits.

Reflecting the continued strong growth of bank lending to firms and households, net domestic credits expanded by 12.8 percent as credits extended to the private sector rose by 16.1 percent.

Similarly, credits extended to the public sector increased by 5.8 percent, after seven consecutive months of contraction, because of the faster expansion in credits granted to local government and other public entities.

Growth in outstanding loans of commercial banks, net of banks’ reverse repurchase placements (RRPS) with the BSP, rose to 22.5 percent in November from 22.2 percent October.

The growth of bank lending inclusive of RRPS fell to 19.3 percent in November from 21.1 percent in October.

Commercial banks’ loans have been growing steadily at double-digit rates since January last year.

On a month- on- month seasonally- adjusted basis, commercial banks’ lending in November grew by 2 percent for loans net of RRPS, while loans inclusive of RRPS increased by 0.2 percent.

Loans for production activities - which comprised more than fourfifths of banks’ total loan portfolio - grew by 23.4 percent in November from 23.1 percent a month earlier.

On the other hand, the growth of consumer loans decelerated to 18.1 percent in November from 20.2 percent in October, mainly reflecting the slower growth in credit card lending.

“Robust credit expansion should help support the domestic economy in the midst of subdued global growth prospects. Looking ahead, the BSP will continue to monitor economic developments to ensure that monetary policy settings remain supportive of domestic economic activity consistent with the price stability objective,” BSP said.