THE Bangko Sentral ng Pilipinas (BSP) on Wednesday said the country ended 2019 with more cash circulating in the local economy, which it attributed to the rise in bank lending.
The BSP said domestic liquidity—broadly measured as M3 —expanded by 11.4 percent to about P13 trillion in December 2019, faster than the 9.8-percent increase in November.
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 M3 expansion could be detrimental to the country’s overall economic growth especially if it is not enough to fuel productive activities. In contrast, excessively high cash supply growth could stoke inflationary pressures and pull prices upwards.
The BSP said demand for credit remained the principal driver of money supply growth during the month.
Loans for production activities—87.4 percent of banks’ aggregate loan portfolio—expanded at a rate of 9.1 percent in December, higher than the reported growth in November at 8.1 percent.
The sustained increase in production loans was driven primarily by lending to the following sectors: real-estate activities (19.7 percent); financial and insurance activities (17.2 percent); electricity, gas, steam and air- conditioning supply (8.3 percent); construction (23.4 percent); and information and communication (12.9 percent).
Lending volumes declined in the following sectors: manufacturing (-1.9 percent), mining and quarrying (-11 percent), professional, scientific and technical activities (-4.6 percent), and other community, social and personal activities (-21.7 percent).
BSP data also indicated that loans for household consumption grew by 27.5 percent in December, from 26.6 percent in November. The BSP said this is due to faster growth in credit-card and salary-based consumption loans during the period.
At this level, the BSP vowed to “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.