CASH supply circulating in the economy grew to its slowest pace in nearly seven years in January, the Bangko Sentral ng Pilipinas (BSP) reported on Thursday, as demand for credit eased further during the period.
Data from the BSP showed that domestic liquidity—broadly measured as M3—expanded by 7.6 percent in January. The rate of increase is the slowest seen in the Philippines since September 2012.
A growing cash supply is often beneficial for an expanding economy, such as the Philippines, as it provides fuel to the productive sectors of the country.
However, an excessively strong growth in M3 could further stoke inflationary pressures and pull prices upwards. An imbalanced growth of M3 is also an indicator that the economy is potentially overheating.
The growth of cash supply in January was slower than the 9.2-percent expansion recorded in December. In actual terms, cash supply in January hit P11.4 trillion.
The BSP said in a statement that it will “continue to closely monitor domestic liquidity dynamics” and “ensure that overall monetary conditions remain in line with maintaining price and financial stability.”
The BSP also reported that bank lending during the month tracked the slow pace of expansion of cash liquidity. The 15.3-percent growth in bank loans recorded in January was slower than the 15.7-percent posted in December.
Data from the BSP showed that loans for production activities still comprise the bulk of the banks’ aggregate loan portfolio at 88.6 percent of total.
The growth in this type of loans was driven primarily by increased lending in the wholesale and retail trade sectors, repair of motor vehicles and motorcycles, financial and insurance activities, manufacturing, real estate, electricity, gas, steam and air-conditioning supply, and construction.
BSP figures indicated that bank lending declined in the professional, scientific and technical activities by 13.2 percent.
Similarly, the growth of loans for household consumption was slower in January at 12.7 percent, from the 13.6-percent expansion recorded in December.
The BSP said the decline in credit-card loans and motor vehicles, as well as the contraction in salary-based general-purpose consumption loans offset the expansion in other types of household loans during the month.