Domestic liquidity or the money supply circulating in the financial system grew 7.7 percent year-on-year to P12 trillion in September, faster than the revised 6.3-percent expansion in August, as demand for credit remained strong, the Bangko Sentral ng Pilipinas said Thursday.
Data showed that on a month-on-month seasonally-adjusted basis, M3 increased by 1.5 percent.
“Demand for credit remained the principal driver of money supply growth. Domestic claims grew by 7.5 percent in September from 7.1 percent [revised] in the previous month due mainly to the sustained growth in credit to the private sector,” the BSP said.
“Loans for production activities continued to be driven by lending to key sectors such as real estate activities; financial and insurance activities; construction; electricity, gas, steam, and airconditioning supply; and wholesale and retail trade, repair of motor vehicles and motorcycles,” it said.
Loans for household consumption increased due to the growth in motor vehicle loans, credit card loans, and salary-based general purpose consumption loans during the month.
Data showed that outstanding loans of universal and commercial banks, net of reverse repurchase placements with the BSP, grew at a steady rate of 10.5 percent in September, similar to the rate recorded in August.
Loans for production activities”•which comprised 87.4 percent of banks’ aggregate loan portfolio, net of RRPs”•expanded at a steady rate of 9 percent in September, unchanged from the reported growth in August.
“The sustained increase in production loans was driven primarily by lending to the following sectors: real estate activities [18.3 percent]; financial and insurance activities [17.6 percent]; construction [36.2 percent]; electricity, gas, steam and air conditioning supply [9.2 percent]; and wholesale and retail trade, repair of motor vehicles and motorcycle [4.8 percent],” the BSP said.
Meanwhile, loans for household consumption surged 26.2 percent in September, faster than 25.4 percent in August on strong demand for motor vehicles, credit card loans, and salary-based general purpose consumption loans.
ING Bank Manila said earlier a modest growth in bank lending was expected in the months ahead despite the move of Bangko Sentral ng Pilipinas to reduce the reserve requirement because banks diverted the unleashed liquidity to government securities.
“So far, BSP has implemented 200 bps worth of RRR reductions with 200 bps worth more in the pipeline. Governor [Benjamin] Diokno shared that this initial 200 bps reduction, resulting in a fresh P200 billion in additional liquidity, has gone almost exclusively to the local GS [government securities] market with data corroborating this claim with trading volumes spiking right after each RRR infusion,” ING Bank Manila senior economist Nicholas Mapa said in a report.