THE overall growth of cash circulating in the economy remained tame in June, as bank lending slowed during the period, according to data from the Bangko Sentral ng Pilipinas (BSP).
The BSP reported on Wednesday a 6.4-percent rise in the country’s domestic liquidity—broadly measured as M3—in June this year to hit P11.8 trillion.
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. Excessively high cash supply growth could stoke inflationary pressures and cause prices to shoot up.
At its current level, the BSP said it will continue to “closely monitor domestic liquidity dynamics to ensure that overall monetary conditions remain in line with the BSP’s price and financial stability objectives.” Data pointed to demand for credit as the principal driver of cash supply growth during the period.
Bank lending up
In a separate statement, the BSP said bank lending grew by 10.5 percent, slower than the 11.9 percent recorded in May.
Loans for production activities—which comprised 88 percent of banks’ aggregate loan portfolio—increased at a slower pace of 9.8 percent in June from 11.5 percent in the previous month.
According to the BSP,
the expansion in production loans was driven primarily by lending to the
following sectors:
real-estate activities at 13.5 percent; financial and insurance activities, 22
percent; electricity, gas, steam and air conditioning supply, 13.5 percent;
construction, 42.5 percent; wholesale and retail trade, repair of motor
vehicles and motorcycles, 6.5 percent; and manufacturing, 4.1 percent.
All other sectors also posted an increase in bank lending during the month except those in other community, social and personal activities, which declined by 51.9 percent ;and professional, scientific and technical activities, which fell by 30.5 percent.
In contrast, loans for household consumption grew faster during the month. Household loan growth hit 15.3 percent in June, from 14.6 percent in May. The BSP said this is due to faster growth in credit card, motor vehicle and salary-based general purpose consumption loans during the month.