Money supply, bank loans climbed in April on sustained credit demand

Domestic liquidity or the money supply in the financial system picked up 7 percent year-on-year to P11.7 trillion in April 2019, driven by the sustained demand for credit from different sectors of the economy, the Bangko Sentral ng Pilipinas said over the weekend.

Data showed that the April growth was faster than the revised 6.1-percent expansion in March 2019. The BSP said that on a month-on-month seasonally-adjusted basis, liquidity, also called M3, increased by 1.5 percent. 

“Demand for credit eased slightly but remained the principal driver of money supply growth. Domestic claims grew by 9.5 percent in April from 9.8 percent [revised] in the previous month due mainly to the sustained growth in credit to the private sector,” the BSP said in a statement.

“Loans for production activities continued to be driven by lending to key sectors such as financial and insurance activities, real estate activities, wholesale and retail trade, repair of motor vehicles and motorcycles; construction; manufacturing; and electricity, gas, steam and air-conditioning supply,” it said.

Loans for household consumption grew faster amid the acceleration in credit card loans and motor vehicle loans but this was slightly offset by the slower growth in salary-based general purpose consumption loans and other types of household loans. 

Net claims on the central government expanded by 0.5 percent in April, faster than the revised 0.2-percent growth in the previous month. 

Net foreign assets in peso terms grew by 3.8 percent in April, up from 2.1 percent in March. The BSP’s NFA position continued to expand during the month, supported by foreign exchange inflows coming mainly from overseas Filipinos’ remittances and business process outsourcing receipts. 

The NFA of banks decreased as their foreign liabilities rose due to increased placements and deposits made by foreign banks with their local branches and other banks. 

Preliminary data showed that outstanding loans of universal and commercial banks, net of reverse repurchase placements with the BSP, grew 12.7 percent in April, slightly slower than the revised 12.9 percent in March. 

The growth in bank lending inclusive of RRPs accelerated to 12.8 percent in April from 11.5 percent in the previous month. On a month-on-month seasonally-adjusted basis, commercial bank loans net of RRPs and inclusive of RRPs decreased by 1.1 percent and 0.4 percent,  respectively. 

Loans for production activities―which comprised 88.2 percent of banks’ aggregate loan portfolio, net of RRP―increased at a slower pace of 12.4 percent in April from 12.8 percent in the previous month. 

The growth in production loans was driven by lending to financial and insurance activities (28.8 percent); real estate activities (13.9 percent); wholesale and retail trade, repair of motor vehicles and motorcycles (11.9 percent); construction (48.9 percent); manufacturing (10.7 percent); and electricity, gas, steam and air-conditioning supply (11.2 percent). 

Meanwhile, loans for household consumption grew by 15 percent in April, compared to a 15.1-percent in March.  The faster growth in credit card loans and motor vehicle loans was slightly offset by the slower expansion in salary-based general purpose consumption loans and other types of household loans during the month. 

The BSP said it would continue to ensure that the expansion in domestic credit and liquidity would remain consistent with promoting non-inflationary and sustainable growth. 

Topics: Domestic liquidity , Money supply , bank loans , Bangko Sentral ng Pilipinas , BSP
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