GROWTH of money supply eased to its slowest pace in nearly three years in July amid smaller reserves held by the Bangko Sentral ng Pilipinas (BSP), even as bank lending accelerated in the same month.
Domestic liquidity or M3, or the broadest measure of money in an economy, grew by 11% to P11.103 trillion in July from P10.004 trillion a year ago, slower than the 11.8% to P11.062 trillion logged in June.
This is the slowest M3 growth seen since a 9.4% increase in December 2015.
Month on month, liquidity rose by 0.6%.
Claims on the national government and other sectors through securities picked up by 16.1% in July, matching the rate seen the previous month. Net claims on the government grew by a slower 12.3% in July from 12.8% the previous month, while increase of claims on other sectors (other financial corporations, public nonfinancial corporations, local governments and the private sector) picked up to 16.9% from 16.7% in the same comparative months.
Contributing to the moderation of money supply growth was the 0.1% year-on-year increase in net foreign assets (NFA), compared to a 2.8% year-on-year pickup in June. “The BSP’s NFA position declined in July relative to June, reflecting the decrease in gross international reserves,” the central bank said.
Dollar reserves dipped to $76.713 billion in July from $77.521 billion amid lower gold valuations and as the BSP used its reserves to intervene in the daily peso-dollar trading.
On the other hand, foreign assets held by banks rose due to bigger loans and investments in debt papers.
The BSP raised interest rates by another 25 basis points (bp) in its June policy meeting following the first hike of the same magnitude in nearly four years in May, as policy makers sought to rein in inflation expectations. This was later on followed by a strong 50bp rate hike in August.
Banks also handed out more credit in July, marking the fastest climb since April.
Bank lending surged by 19.6% compared to June’s 19.1% increase.
Counting reverse repurchase deals as well, total loans grew by 18.7% in July compared to 17.7% the preceding month.
Most of the loans went to production activities, surging 19.7% from a year ago. Lending to the construction sector saw the biggest increase at 37.6%, according to latest data. This comes amid the government’s aggressive infrastructure spending push.
Other industries which received additional credit were financial and insurance activities (35.9%); wholesale and retail trade, repair of motor vehicles and motorcycles (25.6%); manufacturing (19%); and real estate (15.9%).
At the same time, July saw lending for administrative and support services activities slashed by nearly half and that for agriculture cut by 7.1%.
Lending for retail borrowers slowed to a 16.9% increase compared to June’s 17.8% climb due to lower salary-based credit and car loans. These tempered the impact of a jump in credit card borrowings, the BSP said.
“The BSP will continue to ensure that the expansion in domestic credit and liquidity proceeds in line with overall economic growth, while remaining consistent with the BSP’s price and financial stability objectives,” the central bank said. — Melissa Luz T. Lopez