MONEY supply circulating in the economy reached P11.4 trillion by the end of the year’s first quarter, posting a slow growth from its level in the same period last year, the Bangko Sentral ng Pilipinas (BSP) reported.
Data from the BSP showed domestic liquidity—broadly measured as M3—grew by 4.2 percent in March this year, significantly slower than the 7.1-percent expansion rate in the previous month.
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 slow growth in M3 could be detrimental to the country’s overall growth, especially if it is not enough to fuel the productive activities in the economy. An excessively high cash supply growth, meanwhile, could stoke inflationary pressures and pull prices upward for the economy.
An imbalanced growth of M3 is also an indicator that the economy is potentially overheating.
At this level, however, the BSP vowed to keep a close watch on domestic liquidity growth to ensure its appropriateness to the dynamics of the local economy.
“The BSP will continue to closely monitor domestic liquidity dynamics to ensure that overall monetary conditions remain in line with maintaining price and financial stability,” the BSP said.
The expansion in money supply during the month largely came from demand for credit.
Parallel to the M3 slowdown, bank lending also grew at a slower rate of 9.9 percent in March, from 13.7 percent in February.
Data from the BSP show that loans for production activities—which comprise 89.5 percent of banks’ total loan portfolio—increased at a slower pace of 11.4 percent in March from 13.6 percent in the previous month.
The growth in production loans was driven primarily by increased lending to the following sectors: financial and insurance activities at 32.7 percent; wholesale and retail trade, repair of motor vehicles and motorcycles at 11.6 percent; real-estate activities at 8.7 percent; manufacturing at 10.6 percent; construction at 41.7 percent; and, electricity, gas, steam and air-conditioning supply at 9.4 percent.
Bank lending to other sectors also increased during the month except those in other community, social and personal activities which declined by 59.7 percent; professional, scientific and technical activities by 19 percent; mining and quarrying with a 3.3 percent decline; and, human health and social work activities by 0.2 percent.
Meanwhile, loans for household consumption also declined by 5.8 percent in March from a growth of 14.9 percent in February. The BSP attributed this to the deceleration in credit-card loans and contraction in motor vehicle loans, salary-based general purpose consumption loans and other types of household loans during the month.