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M3, lending growth slow in Jan.

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By Melissa Luz T. Lopez, Senior Reporter

MONEY SUPPLY growth eased in January to post the slowest pace in over six years, matching a softer pickup in bank loans, the Bangko Sentral ng Pilipinas (BSP) said yesterday.

Domestic liquidity or M3, which is the broadest measure of money in an economy, grew by 7.6% year-on-year to reach P11.4 trillion. This pace is slower than the 9.2% growth recorded in December, and is the slowest since September 2012.

Still, money supply rose by 0.6% compared to a month prior.

“Demand for credit eased but remained the principal driver of money supply growth,” the central bank said in a statement.

Net claims on the central government slowed sharply in January, posting a modest 4.7% rise versus the 16.4% increase the previous month. Meanwhile, domestic claims grew 12.2%, also decelerating from December’s 14.6% pace but still supported by strong borrowings among the private sector.




Net foreign assets (NFA) expressed in the peso also contracted by 0.9% versus a year ago, reversing a 1.3% climb previously. Foreign assets of banks also went down due to higher loans as well as investments in debt papers.

On the other hand, the central bank’s NFA position expanded for the month as gross international reserves grew to a 20-month high.

Some market players have said that money supply has tightened, but central bank officials noted that the tightness was temporary and that ample funds remain in circulation.

BSP officials voted to keep benchmark rates steady at the 4.25-5.25% range during their November and February meetings, pointing out that they are allowing the cumulative 175 basis points of increases in 2018 to “work their way through the system.”

Some market watchers have been calling for a reduction in the 18% reserve requirement ratio as early as this quarter, with a one percentage point cut expected to unleash around P100 billion in circulation.

SOFTER LENDING
Bank lending growth also slowed for the third straight month given softer demand from both retail and corporate borrowers.

Outstanding loans went up by 15.3% back in January, slipping from the downward-revised 15.7% pace in December. Month-on-month, total lending still climbed by 0.9%. However, the credit growth is the slowest since March 2016.

Factoring in reverse repurchase agreements, bank lending growth softened to 14.4% from 14.8%.

Production loans still accounted for the bulk of credit at roughly 88.6%, even though growth inched lower to 15.5% from 15.8% previously.

Construction loans continued to see the biggest rise at 45.8%, followed by financial and insurance activities (26.5%); wholesale and retail trade, repair of motor vehicles and motorcycles (16.5%); and manufacturing (14.8%).

All other industries also received bigger credit lines during the period, the BSP said, except professional, scientific and technical activities which slipped by 13.2%.

Household credit also slowed to 12.7% from 13.6% in December. This was due to a decline in credit card and motor vehicle loans, while salary-based borrowings contracted from a year ago.

The BSP said they will “continue to ensure” that credit and liquidity growth will continue to prop up economic activity.