By Melissa Luz T. Lopez
Senior Reporter
MONEY SUPPLY growth eased anew in September to post its slowest pace in almost three years, the central bank said, as bank lending also cooled at a time of higher interest rates.
Domestic liquidity or M3, the broadest measure of money in an economy, expanded by 9.7% year-on-year, slower than the 10.4% pace logged in August, the Bangko Sentral ng Pilipinas (BSP) reported on Wednesday. By face value, money supply totalled P11.2 trillion.
This is the slowest M3 growth logged since December 2015, and is the first time in nearly three years that the increase was in the single-digit level. Month on month, money supply rose by a modest 0.1%.
Funds from local sources grew by 14.5% that month, decelerating from a 15% increase posted in August as loans to the private sector eased, the central bank said in a statement.
Meanwhile, net claims on the government went up faster at 11% from 8.7% the previous month. This reflected increased borrowings made by the national government.
Net foreign assets in peso terms even dropped by 0.7% from a year ago, milder compared to a 1.3% contraction posted in August to reflect lower gross international reserves maintained by the BSP.
Dollar reserves dropped to a seven-year low of $75.161 billion in September due to lower gold valuations and as the BSP used the stash to defend the currency during the daily peso-dollar trading.
Meanwhile, foreign assets maintained by banks picked up due to higher loans as well as investments in debt papers, the central bank added.
The BSP introduced back-to-back rate increases worth 50 basis points (bp) each during their August and September meetings in order to rein in inflation expectations. This brought the key policy rate to 4.5%, the highest level in nearly a decade.
Despite the slower increase, the central bank said that overall liquidity conditions “remain supportive of the country’s growth requirements,” with economic managers targeting faster growth during the second semester in order to realize the downward-revised 6.5-6.9% target for 2018.
Growth in approved credit lines also eased in September to mark its slowest pace in nearly two years.
Bank lending went up by 17.4% during the month, still robust but slower than the 18.9% increase in August. If reverse repurchase deals are included, total loans were 16.3% higher versus an 18.4% climb the month prior.
This is the slowest growth logged since December 2016, where bank lending posted a 17.3% increase.
Bulk of the loans were extended for production activities, which surged by 17.2% from a year ago versus the previous month’s 19.1% spike.
Lending to the construction sector continued to see the biggest rise at 36.4%, just as the government’s aggressive infrastructure spending push picks up pace.
Other industries which received additional funding are financial and insurance activities (31.4%); wholesale and retail trade, repair of motor vehicles and motorcycles (22.5%); manufacturing (20.6%); and real estate (15.8%).
Meanwhile, lending for administrative and support services activities was halved, while credit lines for other community, social and personal activities and professional, scientific and technical
activities went down by 12% and 11%, respectively.
Reversing the trend is consumer lending, which posted a faster 17.9% growth in September versus 15.8% a month ago. This came amid higher auto, credit card and salary-based loans which offset declines in other types of household borrowings.
The central bank said they will remain watchful over credit and liquidity growth to ensure price and financial stability.