By Melissa Luz T. Lopez, Senior Reporter

MONEY SUPPLY growth softened in September despite a sustained double-digit surge in bank lending, latest data from the Bangko Sentral ng Pilipinas (BSP) showed.

Domestic liquidity or M3, which is the broadest measure of money in an economy, expanded by 14.5% last month to hit P10.146 trillion, the central bank said in a statement released late Monday. More money circulated in the Philippines as of end-September, although the growth slowed from the 15.4% pace clocked in August.

Such a pace is the slowest since an annualized growth of 13.5% recorded in July. Month on month, liquidity inched up by 0.7%.

A “moderate” increase in borrowings made by the national government led to a slower increase in money supply, which led to a 16.1% increase in total domestic claims from 16.9% a month prior.

Still, “sustained demand for credit” from the private sector injected more funds into the financial system, the central bank said.

Meanwhile, net foreign assets expressed in the peso steadied from a year ago, largely due to a decline in the BSP’s gross international reserves amid lower gold valuations and “tactical interventions” done by the central bank for the peso-dollar exchange rate.

Making up for the flat growth is an expansion in the foreign assets held by local banks, which came on the back of higher loans and additional investments in marketable debt papers.

BSP Deputy Governor Diwa C. Guinigundo has said that there have been signs of shrinking excess liquidity held by local financial players, as observed with the trend undersubscription for the central bank’s auction of term deposits. This prompted the monetary authority to reduce its weekly offerings to P130 billion this November from a high of P180 billion earlier this year.

LENDING PICKS UP
Philippine banks grew more upbeat in their lending activities in September to mark the fifth straight month of acceleration.

Domestic credit jumped by 21.1% last month from a 20.4% growth posted in August, the BSP said in a report. Total outstanding loans amounted to P6.76 trillion as of end-September, according to BSP data.

Computed to factor in reverse repurchase agreements entered into by banks, total lending went up by 20.1% from 17.9% a month ago.

Lending growth is the fastest in at least two years, and sustains a faster monthly climb since May.

Bulk of the fresh loans went to production activities to account for 88.8% of total bank credit, which surged by about a fifth.

Credit lines extended to other community, social and personal activities soared by more than double at 174.9% from a year ago. This is followed by borrowings to the information and communication sector (38.8%); electricity, gas, steam and airconditioning supply (24.1%); and financial and insurance activities (20.4%), according to BSP data.

All other sectors posted increases except for a 0.8% decline in lending for public administration, defense and compulsory social security.

On the other hand, growth in consumer loans slowed to 20% in September from a 22.8% climb the previous month. A slower pickup in car loans, salary-based borrowings, and other types of household loans offset an increase in credit card debt, the central bank said.

The BSP said it will keep tabs on domestic credit and money supply conditions to ensure that consumer prices will remain stable.

Several economists have flagged overheating risks for the Philippine economy as credit growth remains “elevated,” which could potentially disrupt financial markets if left untamed.

For its part, central bank officials have said that rapid credit growth is merely a reflection of upbeat economic activity in the Philippines, particularly as the Duterte administration pursues an aggressive infrastructure spending plan until 2022.

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