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June money supply growth fastest in a year

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MORE MONEY circulated in the economy in June — fueled by rising bank lending — to post the fastest climb in a year, the central bank reported yesterday.

Domestic liquidity or M3, which is the broadest measure of money in an economy, grew by 13.2% that month to P9.878 trillion, the Bangko Sentral ng Pilipinas (BSP) said, citing strong demand for credit that fueled growth in money supply.

M3 growth picked up from the downward-revised 11.3% posted in May, and is the fastest pace seen since a 13.4% climb in July 2016.

Month on month, liquidity increased by 1.8%.

Bigger borrowings incurred by private firms drove a 15.4% increase in domestic money claims in June, coming from 14.3% the previous month.

Money held by the national government likewise jumped by 14% from a year ago as the state borrowed more funds to support its aggressive spending plans.

In contrast, the year-on-year growth in net foreign assets slowed to a 2.8% in June when expressed in peso terms, coming from the preceding month’s 4.6% climb.

Still, the bigger amount of assets came on the back of overseas Filipino workers’ remittances and business process outsourcing sales, the central bank said.

Foreign holdings held by banks likewise grew as they handed out more loans and placed more funds in debt papers.

“The expansion in M3 continues to be manageable and consistent with the BSP’s current outlook for inflation and economic activity,” the central bank said in a statement.

BSP Deputy Governor Diwa C. Guinigundo said last month that the central bank will not have to adjust policy rates despite the rapid growth in money supply and credit.

In particular, the central bank can tolerate rapid liquidity growth as it merely mirrors the “higher potential output” of the Philippine economy.

LENDING PICKS UP
Banks in the Philippines handed out bigger credit lines in June and total loans grew by nearly a fifth, according to the central bank.

Bank lending jumped by 19% in June from a year ago, sustaining an uptrend from an 18.7% increase posted in May.

June’s clip was also the fastest since April’s 19.2% climb.

Factoring in the reverse repurchase agreements held by banks, total lending increased by 18.3% from 17.4% a month ago.

Bulk of the loaned funds went to productive sectors, growing 17.9% from a year ago.

In particular, loans secured by information and communication technology companies posted the biggest jump at 35.5%, followed by credit to the electricity, gas, steam and airconditioning supply firms which rose by a fourth.

Other sectors that posted double-digit gains in terms of lending were real estate at 17.8%, as well as manufacturing and wholesale and retail trade that grew by 11.6% each.

On the other hand, growth in consumer lending softened to 22.5% from 23.6% previously, propped up by higher credit card debts, auto loans and salary-based borrowings, the central bank said.

The central bank said it will keep a close watch on domestic credit and liquidity conditions to make sure that overall commodity prices and the financial system will remain stable, while overall economic prospects will stay firm. — Melissa Luz T. Lopez

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