Finance


M3 growth slows to 12.4% in January




Posted on March 02, 2017


MONEY SUPPLY continued to expand as 2017 opened, buoyed by strong credit demand that allowed a double-digit increase in January, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

100-peso bills
Domestic liquidity or M3, which stands as the broadest measure of money in an economy, grew by 12.4% in January from a year ago, although a tad slower than the 12.7% pace logged in December.

M3 growth logged the slowest since a 12% pace clocked in August 2016.

Money circulating in the economy totalled P9.4 trillion in January, according to central bank data. Month on month, money supply picked up by 1.6%.

“Demand for credit remains the principal driver of money supply growth,” the BSP said in a statement published late Tuesday.

Domestic claims expanded by 15.9% in January, slowing from a 17% pace seen in December 2016. The increase was largely driven by robust borrowing by the private sector, as seen in the steady rise in bank loans.

Meanwhile, claims on the national government rose by nearly a fifth after continued the state withdrew more funds from its deposits placed under the central bank’s watch.

The BSP previously attributed the continued withdrawals by the government to its plans to boost spending, particularly on infrastructure and on social services.

The Budget department has earmarked some P846.3 billion for infrastructure projects under the 2017 spending program, which accounts for 5.3% of gross domestic product (GDP). The goal is to eventually raise its share to 7% of GDP over the next six years.

On the other hand, net foreign assets expressed in peso terms rose faster at 8.7% in January from 7.8% the previous month, boosted by remittance inflows, hot money placements by foreign investors, and receipts from the business process outsourcing sector, the BSP added.

Foreign assets held by Philippine banks also grew as they took on a bigger volume of interbank loans, coupled with higher deposits with other banks and investments on debt papers.

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

Economic managers are looking to spur economic growth between 6.5% and 7.5% this year, while inflation is seen to log within the central bank’s 2-4% target band.

The BSP has been trying to capture excess liquidity in the local financial system by offering term deposits on a weekly basis, in order to reduce the amount of idle funds held by banks and steer market rates closer to the BSP’s 3% benchmark.

LENDING GROWTH PICKS UP
Local banks also granted more loans in January, with credit growth logging the fastest pace in two months.

Commercial lending increased by 17.9% during the month from a year ago, coming from a 17.3% surge seen in December. Month on month, lending rose by 1.8% to reach P5.989 trillion.

Factoring in the banks’ reverse repurchase holdings, total lending increased by 16.2%, somewhat steady from December’s 16.1% stride.

About 89.2% of total loans went to production activities which picked up by 17.5%, faster than a 16.9% climb seen a month prior.

Loans for financial and insurance activities saw the fastest climb at 25.1%, followed by a 20.6% increase in credits for wholesale and retail trade and the repair of motor vehicles and motorcycles. Other sectors that saw rapid loan growth were real estate (18.7%), electricity, gas, steam and air-conditioning supply (15.8%); and manufacturing (8.5%).

In contrast, loans extended for public administration and defense, compulsory social security slipped by 8.2%, while those given to mining and quarrying firms also dropped by 3.3%.

Meanwhile, loans extended to households posted robust growth to log a 23.7% increase in January on the back of higher credit card, motor vehicle, and salary-based loans, which offset declines in other types of consumer debt.

Looking ahead, the central bank said it will continue to monitor and ensure that liquidity and bank lending growth will support economic growth further, while keeping price and financial stability intact. -- Melissa Luz T. Lopez