CASH supply growth in the country remained steady in November last year, the Bangko Sentral ng Pilipinas (BSP) reported on Tuesday.
Latest data from the Central Bank showed that domestic liquidity — broadly measured as M3 — grew by 8.4 percent in November from its previous year’s level to hit P11.3 trillion in November 2018.
This is a slight acceleration from the revised 8.3 percent expansion in the previous month.
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 strong growth in M3 could further stoke inflationary pressures and pull prices upwards for the economy. An imbalanced growth of M3 is also an indicator that the economy is potentially overheating.
At this level, the BSP said it will continue to monitor liquidity conditions to make sure there is enough fuel for economic expansion.
“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.
According to the BSP’s statement, domestic liquidity was largely driven by demand for credit during the period.
Contrastingly, however, overall bank lending was found to have decelerated in November 2018.
Preliminary data show that outstanding loans of commercial banks grew at a slower rate of 16.8 percent in November, from 18.1 percent in October.
Loans for production activities continue to drive bank lending during the year, as it slowed down to 17.2 percent from the 18.7 percent in the previous month.
This type of loans accounts for 88.7 percent of the banks’ aggregate loan portfolio.
The BSP said growth in production loans was driven primarily by increased lending to the following sectors: wholesale and retail trade, repair of motor vehicles and motorcycles rising by 19.7 percent; financial and insurance activities up by 29.4 percent; real estate activities higher by 12.5 percent; manufacturing increasing by 16 percent; electricity, gas, steam and airconditioning supply with an 11 percent expansion; and, construction at 38.1 percent.
On the other hand, professional, scientific and technical activities declined by 11 percent; while other community, social and personal activities was also down by 12 percent; and, administrative and support services activities by 54.6 percent.
The growth of loans for household consumption also slowed down to 13.8 percent in November from 14.6 percent in the previous month.
The BSP attributed this to the weaker expansion in credit card loans and motor vehicle loans, as well as the contraction in salary-based general purpose consumption loans and other types of household loans.