Liquidity growth steady in June despite RRR cuts

MONEY SUPPLY growth remained steady amid slightly lower demand for credit, the Bangko Sentral ng Pilipinas (BSP) reported Wednesday, even as the central bank trimmed lenders’ reserve requirement ratios (RRR).

Domestic liquidity or M3, the broadest measure of money in an economy, grew 6.4% year-on-year to about P11.78 trillion in June, steady from the expansion recorded in May, latest BSP data showed.

Money supply increased 0.3% month-on-month.

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

Net claims on the central government contracted by 3.9% in June, following the a 6.4% decline tallied the previous month, party due to the increase in deposits by the national government with the BSP.

Meanwhile, domestic claims grew 6.2%, decelerating from May’s 6.8% pace, supported by sustained growth in loans to the private sector.

The central bank said credit for production activities continued to be driven by lending to key sectors such as real estate activities, financial and insurance activities, electricity, gas, steam and airconditioning supply, construction, wholesale and retail trade, repair of motor vehicles and motorcycles, as well as manufacturing.

Meanwhile, loans for household consumption increased on the back of growth in credit card loans and other types of household loans in June.

Net foreign assets (NFA) expressed in peso terms expanded by 5.3% in June from 4.4% in May, propelled by foreign exchange inflows coming mainly from business process outsourcing receipts as well as remittances from overseas Filipinos.

In contrast, the NFA of banks continued to decline as their foreign obligations increased due to higher placements and deposits made by offshore banks with their local branches and other lenders.

After a 100-basis-point (bp) RRR cut across all banks on May 31, the BSP trimmed the reserve ratios of universal and commercial lenders and thrift banks by another 50 bps last June 28 to 16.5% and 6.5%, respectively.

Another 50-bp cut was implemented last July 26 to bring the RRR of big banks to 16% and thrift banks to 6%, completing the phased cuts the BSP announced in May.

BANK LENDING SLOWS
Meanwhile, bank lending decelerated in June due to slower growth in credit to the corporate sector, the BSP reported separately.

Outstanding loans grew 10.5% in June, slower than the 11.9% pace recorded in May. Inclusive of reverse repurchase agreements, bank lending growth also eased to 10.5% in June from 10.6% the previous month.

Production loans accounted for the bulk of the credit at 88% even as growth eased to 9.8% in June from the 11.5% the previous month.

Construction loans continued to log the highest increase at 42.5%, followed by financial and insurance activities at 22%; real estate activities at 13.5%; electricity, gas, steam and airconditioning supply at 13.5%; wholesale and retail trade, repair of motor vehicles and motorcycles at 6.5%; and manufacturing at 4.1%, BSP data showed.

Lending to other sectors also increased during the month except those in other community, social and personal activities which dropped 51.9%, and professional, scientific and technical activities, which declined 30.5%.

Loans for household consumption grew 15.3% in June, higher than the 14.6 % booked in May, on the back of growth in credit card, motor vehicle and salary-based loans.

“Going forward, the BSP will continue to ensure that the expansion in domestic credit and liquidity remains consistent with the BSP’s price and financial stability objectives,” the central bank said. — KANV