By Melissa Luz T. Lopez,
Senior Reporter

MORE MONEY circulated in the economy in July as bank lending grew by a fifth, the Bangko Sentral ng Pilipinas (BSP) said yesterday.

Domestic liquidity or M3, which is the broadest measure of money in an economy, rose by 13.5% that month to hit P9.969 trillion, outpacing an upward-revised climb of 13.3% in June and the 13.4% logged a year ago.

Month on month, money supply inched up by 1.4%.

Strong credit demand continued to fuel liquidity growth, which is also the fastest in over a year.

Domestic claims picked up by 15.7%, rising from a 15.4% increase last June on the back of higher borrowings incurred by private companies. The government also held more cash at its disposal with a 13% growth in liquidity as it borrowed more funds during the period, well ahead of its aggressive spending plans.

On the other hand, growth in net foreign assets expressed in peso terms slowed to 2.7%, coming from 2.8% a month ago. Still, the increase was supported by dollar inflows coming from remittances sent by overseas Filipino workers, business process outsourcing receipts, and foreign portfolio investments, the BSP said.

Banks also held a bigger stash of net foreign assets as they handed out more loans and invested more on debt papers, as well as in subsidiary firms.

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

Central bank officials allayed fears on the rapid liquidity and credit growth in the Philippines, noting that such increases simply reflect the sustained pickup in economic activity as well as the “higher potential output” of the economy.

LENDING SURGES
Philippine banks likewise extended more loans in July to post the fastest growth in four months.

Bank lending surged by 19.7% from a year ago, faster than the 19% logged the previous month. It is also the quickest pace seen since a 20.2% growth recorded in March.

Including the reverse repurchase agreements held by the banks, total credit picked up by 18.7% from 18.3% a month prior.

Some 88.4% of the bank loans went to production activities, which in turn grew by 18.9% that month. Borrowers engaged in the information and communication sector again saw the biggest rise in lending at 38.7%; followed by bigger credits extended to electricity, gas, steam and airconditioning supply firms that saw a 27.1% climb.

Other sectors which received bigger loan amounts are real estate (18.9%); wholesale and retail trade, repair of motor vehicles and motorcycles (15.1%); and manufacturing (12.3%).

Consumer loans also kept growing in July to pick up by 22.3%, steadying from a 22.5% increase in June led by higher car mortgages, credit card loans, and salary-based borrowings.

The BSP said it will keep tabs on domestic credit and money supply conditions to ensure that commodity prices and the financial system will remain stable, which in turn will support economic growth.

The central bank decided to trim the weekly auction volumes for the term deposit facility this September as they observed that banks were keen on using their excess funds to grant more loans rather than place it on the low-yielding instruments.

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