CASH supply circulating in the economy grew slightly faster in April but remained at a tame single-digit level during the month, the Bangko Sentral ng Pilipinas (BSP) said.
In a recent report, the Central Bank said domestic liquidity—broadly measured as M3—grew at 7 percent to about P11.7 trillion in April this year. This is an acceleration from the 6.1-percent expansion seen in March.
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 as 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 upwards for the economy.
At this rate, the BSP said in a statement over the weekend that the Central Bank will continue to watch liquidity conditions to make sure it is ample to support the country’s growing needs.
“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.
While the domestic demand for credit continued to drive the rise in the country’s liquidity conditions for the month, contrastingly bank lending grew at a slightly slower rate in April.
Data from the Central Bank showed that the outstanding loans of universal and commercial banks grew at 12.7 percent in April, down from the 12.9 percent in the previous month.
Loans for production activities continued to dominate the lending portfolio of banks—which comprised about 88.2 percent of the banks’ aggregate loan portfolio during the month. The growth in production loans was driven primarily by lending to the following sectors: financial and insurance activities growing at 28.8 percent; real-estate activities with a 3.9-percent expansion; wholesale and retail trade, repair of motor vehicles and motorcycles at 11.9 percent; construction with a 48.9-percent growth; manufacturing at 10.7 percent; and electricity, gas, steam and air-conditioning supply at 11.2 percent.
However, those in other community, social and personal activities declined by 57.2 percent. Loans to professional, scientific and technical activities were also down by 32 percent, while loans for human health and social work activities contracted 0.8 percent. Meanwhile, loans for household consumption grew by 15 percent in April from 15.1 percent in March, as faster growth in credit-card loans and motor-vehicle loans was slightly offset by the slower expansion in salary-based general purpose consumption loans and other types of household loans during the month