THE growth of cash circulating in the local economy ticked slightly faster in July this year, but was still in the low single-digit pace during the month.
Data from the Bangko Sentral ng Pilipinas (BSP) showed domestic liquidity—broadly measured as M3 —grew 6.7 percent in July this year from its level in the previous year.
It was, however,
slightly below the 6.9-percent average M3 growth of the country in the first
half of the year and below the 11.1-percent growth seen in the same
period last year.
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 upwards for the economy.
In its statement on the July domestic liquidity increase, the BSP vowed to continue to monitor domestic liquidity dynamics to ensure that overall monetary conditions remain in line with maintaining price and financial stability.
Data pointed to demand for credit as the principal driver of cash supply growth during the period.
Bank lending robust
In a separate statement, the regulators said bank lending grew significantly faster than the overall domestic liquidity growth during the month.
Preliminary data show outstanding loans of universal and commercial banks grew at a faster rate of 11.1 percent in July from 10.5 percent in June. Loans for production activities—which comprised 87.6 percent of banks’ aggregate loan portfolio—grew by 9.8 percent in July, similar to the pace recorded in the previous month.
The growth in production loans was driven primarily by lending to the following sectors: real-estate activities (18.1 percent); financial and insurance activities (19.1 percent); electricity, gas, steam and air conditioning supply (13.8 percent), construction (38.2 percent); and wholesale and retail trade, repair of motor vehicles and motorcycle (4.5 percent).
However, loans to other community, social and personal activities declined by 41.3 percent while loans to professional, scientific and technical activities declined 36 percent during the month.
Meanwhile, loans for household consumption grew strongly by 23 percent in July, from 15.3 percent in June. The BSP attributed this to faster growth in motor vehicle and salary-based general purpose consumption loans during the month.
Image credits: Nonie Reyes