M3 accelerates over six months

Liquidity accelerated in the first six months, according to the Bangko Sentral ng Pilipinas (BSP), quickly adding that prevailing liquidity conditions remain supportive of
economic growth.

Domestic liquidity—broadly measured as M3—rose to P9.9 trillion in June this year, registering growth of 13.2-percent year-on-year. This was faster than the 11.3-percent revised expansion in the previous month.

A growing cash supply is beneficial for the expanding economy as liquidity fuels its productive sectors and increases its capacity to grow.

However, excessive cash-supply growth could be worrisome at it fans inflationary fires.

Excessively slow cash-supply growth, on the other hand, may be bad, especially if it fails to provide financing that keep productive activities going.

But even with accelerated money-supply growth, the BSP gave the assurance that cash-supply growth remains well within Central Bank expectations.

“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.

“Moving forward, the BSP will continue to monitor monetary conditions closely to ensure that overall domestic liquidity dynamics stay in line with the BSP’s price and financial stability objectives,” it added.

According to the Central Bank, demand for credit remains the principal driver of money supply growth.

In a separate report, the BSP said the growth of outstanding loans of banks also accelerated in June, mirroring developments in the country’s overall cash stream.

In particular, the outstanding loans of commercial banks grew 19 percent in June, up from only 18.7 percent in May.

The loans helped finance production activities that accounted for more than 88 percent of the banks’ aggregate loan portfolio.

Loans for household consumption, meanwhile, slowed to 22.5 percent in June, from 23.6 percent in May.

The BSP said the growth in household loans was driven by growth in credit-card loans and other types of household loans, as well as sustained growth in auto loans and salary-based general purpose loans.

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Bianca Cuaresma graduated cum laude from the University of Santo Tomas (UST) with a degree in AB Journalism. She was with the BusinessMirror during her internship in 2012 where she was assigned at the Department of Foreign Affairs (DFA) beat. She continued to be of service to the paper after she graduated in 2013. In 2014, she was awarded as the Reporter of the Year by the paper for her coverage in the Bangko Sentral ng Pilipinas (BSP). She is a BusinessMirror reporter for 3 years now, and has covered general assignments and agencies related to banking and finance in the country.