The rate of expansion of the country’s cash supply picked up in September this year, but the rate remained in the single-digit territory even after the Bangko Sentral ng Pilipinas (BSP) implemented cuts in the reserve requirement ratio (RRR).
Data from the BSP showed that domestic liquidity—broadly measured as M3—grew by an annualized rate of 7.7 percent in September this year. This is faster than the 6.3 percent recorded in August.
As of September, the total cash supply of the Philippines reached P12 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.
Slow M3 expansion could be detrimental, particularly if it is not enough to fuel economic activities. However, excessively high cash supply growth could stoke inflationary pressures and jack up prices.
The BSP said it will “continue to monitor domestic liquidity dynamics to ensure that overall monetary conditions remain in line with maintaining the BSP’s price and financial stability objectives.”
For September, demand for credit remained the principal driver of cash supply growth.
In a separate statement, the BSP said the outstanding loans of universal and commercial banks rose at a steady rate of 10.5 percent in September, similar to the rate recorded in August.
ING Bank Manila economist Nicholas Mapa said this development indicates the reluctance of corporates to take on hefty loans as they wait for rates to “hit rock bottom.”
Loans for production activities—which comprised 87.4 percent of banks’ aggregate loan portfolio, net of RRPs—expanded at a steady rate of 9 percent in September, unchanged from the data in August.
The sustained increase in production loans was driven primarily by lending to the following sectors: real-estate activities (18.3 percent); financial and insurance activities (17.6 percent); construction (36.2 percent); electricity, gas, steam and air-conditioning supply (9.2 percent); and wholesale and retail trade, repair of motor vehicles and motorcycle (4.8 percent).
Bank lending to other sectors also increased during the month, except those in professional, scientific and technical activities (-35.7 percent) and other community, social and personal activities (-39.8 percent).
Loans for household consumption went up by 26.2 percent in September, from 25.4 percent in August, due to faster growth in motor vehicle, credit card, and salary-based general purpose consumption loans during the month.