M3 expands to over P12T in November
Credit to Author: Mayvelin U. Caraballo, TMT| Date: Wed, 08 Jan 2020 16:22:09 +0000
Growth credited to BSP’s policy settings
THE country’s money supply sustained its fast-paced growth amid the quicker expansion in bank lending, central bank data showed on Wednesday.
In a statement, the Bangko Sentral ng Pilipinas (BSP) said domestic liquidity (M3) grew by 9.8 percent year-on-year to P12.4 trillion in November last year, faster than October’s 8.5 percent. Month-on-month and seasonally adjusted, M3 increased by 1.7 percent.
Domestic claims grew at a faster 8.3 percent from October’s 6.7 percent, “due mainly to the sustained growth in credit to the private sector,” it explained.
Net claims on the central government surged to 13.9 percent from the revised 6.6 percent the month before, “due in part to the sustained increase borrowings by the national government,” the BSP said.
Net foreign assets in peso terms, meanwhile, expanded by 11.5 percent from the previous month’s 9.6-percent growth.
“Demand for credit remained the principal driver of money supply growth,” the Bangko Sentral said.
Bank lending growth also accelerated to 10.1 percent in November from 9.3 percent a month earlier.
On a month-on-month and seasonally adjusted basis, commercial bank loans grew by 1.0 percent.
Lending for production activities, which accounted for 87.2 percent of the aggregate loan portfolio, climbed by 8.1 percent, faster than the reported 7.5-percent growth in October.
The sustained increase in production loans was driven primarily by lending to these sectors: real estate (19.3 percent); financial and insurance (15.3 percent); construction (29.1 percent); and electricity, gas, steam and air conditioning supply (7.6 percent).
Bank lending to other sectors also increased during the month, except those in manufacturing (-2.3 percent), mining and quarrying (-10.8 percent), professional, scientific and technical activities (-16.6 percent), and other community, social and personal activities (-35.7 percent).
However, the central bank noted that loans from universal and commercial banks for household consumption grew by 26.6 percent in November, slightly slower than 26.7 percent in October, “due to faster growth in motor vehicle loans during the month.”
With the latest data, the BSP said it “will continue to ensure that the expansion in domestic credit and liquidity remains consistent with the BSP’s price and financial stability objectives.”
‘Positive effect’
In a comment, Security Bank Corp. Assistant Vice President and economist Robert Dan Roces welcomed the latest data, which he attributed to the central bank’s monetary policy settings.
“It’s good to see credit growth back to double digits in tandem with the sustained march upward of domestic liquidity. This is [an] indication of the positive effect of the RRR cuts to liquidity, and moreso of the forward guidance being provided by the BSP — monetary policy operates on a lag, and the preannounced cuts temper speculation and market expectations,” he told The Manila Times.
RRR, or reserve requirement ratio, is the proportion of current deposits that banks need to keep with the central bank against the sum they can loan out to borrowers.
Monetary authorities already reduced the operational tool by a cumulative 400-basis-point cut to 14 percent last year.
“Moving forward, the turnaround of credit growth in November bodes well for 2019 fourth quarter GDP [gross domestic product] growth, and if sustained, will contribute to the economy hitting the lower end of the government’s 6-7 percent GDP growth target,” Roces said.
Latest data showed that the country’s GDP accelerated to 6.2 percent in the third quarter after the slower-than-expected 5.6-percent and 5.5-percent expansions in the first and second quarters, respectively.