BSP reports faster money supply, October loan growth

Domestic liquidity, or the amount of money circulating in the economy, grew by 8.3 percent year-on-year to about PHP 19.1 trillion in October, based on preliminary data from the Bangko Sentral ng Pilipinas (BSP).

The pace of domestic liquidity growth, also known as M3, was faster than the revised 7.6 percent expansion recorded in September.

After adjusting for seasonal fluctuations, M3 increased by 1.0 percent month-on-month in October.

M3 is a broad measure of money supply that includes currency in circulation, bank deposits, and other financial assets that are easily convertible to cash.

As a key driver of money supply, claims on the domestic sector, which covers private and government entities in the country, rose by 10.5 percent year-on-year in October from a revised 10.6 percent in September.

Claims on a sector represent that sector’s liabilities to depository corporations such as banks and the central bank.

Within domestic claims, credit to the private sector alone grew by 11.0 percent in October from a revised 10.7 percent in the previous month, reflecting the continued expansion in bank lending to nonfinancial private corporations and households.

Net claims on the central government increased by 10.0 percent in October from a revised 10.3 percent in September, driven mainly by higher borrowings of the national government.

Net foreign assets (NFAs) in peso terms rose by 2.1 percent year-on-year in October, slower than the 3.3 percent growth posted in September.

NFAs represent the difference between claims on nonresidents and liabilities to nonresidents of depository corporations.

NFAs of the BSP alone decreased by 0.4 percent, while NFAs of banks grew as their foreign currency-denominated bills payable fell.

The BSP said it will continue to ensure that domestic liquidity conditions remain consistent with its price and financial stability objectives, at a time when inflation has eased to 1.7 percent in October and 1.5 percent in November, both below the central bank’s 2 to 4 percent target range.

Outstanding loans from universal and commercial banks (U/KBs) to businesses and individual consumers also expanded in October, according to separate preliminary data.

Loans from U/KBs grew by 10.3 percent year-on-year in October, a slightly slower pace than the 10.5 percent increase recorded in September.

On a month-on-month seasonally adjusted basis, outstanding U/KB loans rose by 0.6 percent in October.

Growth of outstanding loans to residents was steady at 10.9 percent in October, while outstanding loans to nonresidents dipped by 11.1 percent following a 2.9 percent decline in the previous month.

Loans meant to fund business activities grew at a steady rate of 9.1 percent in October.

Lending increased for several key industries, including real estate (9.9 percent); electricity, gas, steam, and air-conditioning supply (24.8 percent); wholesale and retail trade and repair of motor vehicles and motorcycles (11.7 percent); financial and insurance activities (8.5 percent); information and communication (8.2 percent); and transportation and storage (13.0 percent).

Consumer loans to residents, which include credit card, motor vehicle, and general-purpose salary loans, increased at a slightly slower rate of 23.1 percent year-on-year from 23.5 percent previously.

The BSP monitors bank lending closely because loans are a key transmission channel of monetary policy to the real economy, especially as the central bank has reduced its key policy rate to 5.0 percent this year to support growth while inflation remains subdued.

Looking ahead, the BSP said it will ensure that domestic liquidity and bank lending conditions remain in line with its price and financial stability mandates.

The central bank clarified that the loan figures cited exclude reverse repurchase agreements of U/KBs with the BSP.

For statistical purposes, a resident refers to an individual citizen of the Philippines residing in the country; an individual who is not a citizen of the Philippines but is permanently residing in the country; a corporation or other juridical person organized under Philippine laws; or a branch, subsidiary, affiliate, extension office, or any other unit of corporations or juridical persons organized under the laws of any country and operating in the Philippines, except offshore banking units.

Outstanding loans to nonresidents include loans granted by U/KBs’ foreign currency deposit units to nonresidents.