Money supply accelerated further in April this year as banks continued to lend strongly during the period.
In a report on Tuesday, the Bangko Sentral ng Pilipinas (BSP) said domestic liquidity, also known as M3, rose to P8.6 trillion in April, representing growth of 12.7 percent.
The continued liquidity expansion proved faster compared to the 11.7-percent acceleration recorded in March.
An expanding cash supply is beneficial for a growing economy if it helps fuel the productive sectors and boosts the nation’s capacity to grow.
However, excessively slow cash- supply expansion could prove bad, especially when it does not provide the financing required to keep productive activities going.
An excessively fast cash-supply growth, meanwhile, could stoke inflationary pressures such that mindful calibration is of optimal importance.
Amid the continued acceleration in money-supply growth, the BSP gave assurance that cash-supply growth remain sufficient to finance the requirements of the growing economy.
“The sustained expansion of M3 during the month indicates that money supply remains sufficient to support economic growth,” the central bank said in a statement.
“Going forward, the BSP will continue to monitor monetary conditions closely to ensure that liquidity growth remains consistent with the BSP’s price- and financial-stability objectives,” it added.
The central bank attributed the continued expansion of domestic liquidity to sustained demand for credit.
In a separate report, the BSP said the growth of outstanding loans of banks mirrored the growth in money supply as this posted a 15.6-percent expansion in April.
This was faster than the 14.8 percent bank lending growth in March.
The loan expansion was traced to loans for production activities comprising more than 80 percent of the banks’ aggregate loan portfolio.
Loans for production activities grew by 15.6 percent in April, faster than the 15 percent in the previous month.
The expansion in production loans was driven by increased lending to the following sectors: real-estate activities at 20.5 percent; electricity, gas, steam and air-conditioning supply at 30.6 percent; wholesale and retail trade, repair of motor vehicles and motorcycles at 15.5 percent; financial and insurance activities at 18.5 percent; and information and communication at 31.2 percent.
Bank lending to other sectors, likewise, expanded during the month except for professional, scientific and technical activities, which declined by 0.5 percent; water supply, sewage, waste management and remediation activities at 1.3 percent; and public administration and defense, compulsory social security at 7.3 percent.