The amount of cash circulating in the financial system and the kind of growth it is showing have extended a measure of confidence among monetary officials not to tamper with the rate at which they borrow from or lend to banks at present and over the immediate horizon.
This was indicated in latest data released on Friday by the Bangko Sentral ng Pilipinas, in which domestic liquidity growth—the broadest money measure known as M3 among economists—grew by 8.5 percent in July, or slightly lower than in June, when this grew by 9.3 percent.
Its continued growth allowed domestic liquidity to aggregate P7.7 trillion in July that regulators attributed to sustained demand for credit.
“The bulk of bank loans during the month was channeled to key production sectors, such as real-estate activities; electricity, gas, steam and air-conditioning supply; wholesale and retail trade, and repair of motor vehicles and motorcycles; financial and insurance activities; and manufacturing,” BSP Governor Amando M. Tetangco Jr. said in a statement.
He welcomed the pace of domestic-liquidity expansion in July, saying that this was sufficient to sustain the country’s growth momentum.
“The continued expansion of domestic liquidity during the month indicates that money supply remains sufficient to support economic growth,” Tetangco said.
Similarly, bank lending during the period continued to expand but at a slower pace compared to that in June.
The BSP said bank-lending growth averaged 13.5 percent in July, slower than lending activities growing at a comparably faster rate of 14.2 percent in June.
Loans for production activities—which comprise about P8 of the P10 lent by banks to the country—grew by 13.4 percent from the 14.2-percent expansion in June.
“The expansion in production loans was driven primarily by increased lending in the real-estate sector, electricity, gas steam and air-conditioning supply sector, wholesale and retail trade, repair of motorcycle and motor vehicles, financial-insurance activities and manufacturing.
Bank lending to other sectors also expanded, except for transportation and storage, and other community, social and personal activities.
Loans for household consumption, meanwhile, grew by 13.7 percent in July, also slower than the 14.9 percent in June. The growth was brought about by sustained growth in auto loans, credit-card loans and salary loans.
Meanwhile, net public-Tsector credit rose by 6.5 percent in July, faster than the 1.1-percent growth (revised) a month earlier.