Bank lending, M3 seen to pick up by end-2019
Credit to Author: Mayvelin U. Caraballo, TMT| Date: Fri, 01 Nov 2019 16:20:46 +0000
THE growth of bank lending and money supply in the country is likely to “accelerate” by the end of this year, according to an economist.
In a report released late on Thursday, Security Bank Corp. Assistant Vice President and economist Robert Dan Roces said the bank expected “both loan growth and liquidity levels to accelerate toward year-end as government ramps up spending, with a pause in monetary easing communicated by the central bank.”
His comment comes after the Bangko Sentral ng Pilipinas (BSP) reported that domestic liquidity or M3 expanded by 7.7 percent year-on-year to P12.03 trillion, faster than August’s revised 6.3 percent.
Bank lending grew by 10.5 percent in September — a rate similar to that recorded in August.
Government spending in the first nine months of the year hit P2.62 trillion, up 5.5 percent or P137.2 billion from the amount in the same period last year.
Analysts had projected that the Bangko Sentral would pause on cutting interest rates after implementing a combined 75-basis points (bps) reduction in May, August and September that brought overnight borrowing, lending and deposit rates to 4.00 percent, 4.50 percent and 3.50 percent, respectively.
“And with the pre-announced 100-bps reduction to the RRR (reserve requirement ratio) each for November and December, borrowing and money supply are projected to continue going up well into 2020, [when] we expect around 200 to 300 bps of further reductions to the reserve ratio and likely in a front-loading manner similar to the present policy,” Roces said.
Monetary authorities ordered last week another 100-bps cut on the liquidity-mopping tool to trim the RRR for universal/commercial banks from 15 percent to 14 percent, thrift banks from 5 percent to 4 percent and non-bank financial institutions with quasi-banking functions from 15 percent to 14 percent. This would take effect on December 1.
This followed a cumulative 300-bp reduction to the ratio so far this year. In 2018, 1-percentage-point cuts were also announced in February and May, totaling to 200 bps.