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Wednesday, February 28, 2024

Economist sees sustained growth of money supply, bank loans in Q4

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Domestic liquidity, or the money supply circulating in the financial system, and bank loans are expected to grow faster in the coming months as the economy continues to recover from the impact of the global health crisis, an economist said Tuesday.

Latest data from the Bangko Sentral ng Pilipinas showed that bank loans expanded by 13.4 percent in September from a year ago, faster than 12.2 percent in August, on sustained demand for credit.

Domestic liquidity or M3 grew slower by 5.0 percent year-on-year to about P15.4 trillion in September from the 6.7-percent expansion in August. Data showed that on a month-on-month seasonally-adjusted basis, M3 decreased by 0.2 percent.

“For the coming months, bank loans and M3 growth could still fundamentally accelerate amid measures to further reopen the economy towards greater normalcy,” Rizal Commercial Banking Corp. chief economist Michael Ricafort said in a report.

Ricafort said these measures included the proposed nationwide Alert Level 1 and the resumption of in-person schooling. The government aims to have 100 percent of public schools conducting physical classes by November, while blended learning is still allowed for private schools.

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He said these measures were consistent with the government’s 8-point agenda to mitigate the adverse economic effects of Russia’s invasion of Ukraine for more than eight months or since Feb. 24, 2022.

“[These] would help further increase economic activities as well as the demand for loans/credit…,” Ricafort said.

He said the excess liquidity in the financial system could have also been reduced for the month of September, in view of the P420.4 billion Retail Treasury Bond issuance settled on Sept. 7, including P311.9 billion which represented new borrowings that were effectively siphoned off by the national government.

The BSP earlier said the continued expansion in lending activity and ample liquidity would support the recovery of economic activity and domestic demand.

Outstanding loans to residents, net of reverse repurchase, climbed 13.0 percent in September following an expansion of 12.1 percent in August.

Consumer loans to residents also grew by 20.5 percent in September from 18.3 percent in August, driven by the year-on-year increase in credit card loans, motor vehicle loans and salary-based general purpose consumption loans.

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