The money circulating in the local cash stream grew faster at the beginning of the year, but the Bangko Sentral ng Pilipinas (BSP) said the acceleration is still consistent with the prevailing outlook for local price growth.
The BSP on Wednesday reported preliminary data of domestic liquidity—broadly measured as M3—to have hit P10.6 trillion in January this year. The recorded growth represented a 12.8-percent jump from its comparable level in 2017, faster than the previous month’s 11.9-percent growth.
While a growing cash supply in an economy is known to be beneficial for its expansion, as liquidity fuels productive sectors to increase the nation’s capacity to grow, an excessively fast cash supply growth could be worrisome as it may stoke inflationary pressures on the country’s real economy and may indicate overheating.
Earlier, analysts have raised concern about the early signs of an overheating economy, as evidenced by high cash-supply growth in the system. Domestic liquidity peaked at around 15 percent in mid-2017.
At this level, the BSP said the growth in M3 is “consistent with the BSP’s prevailing outlook for inflation and economic activity.”
“Nevertheless, the BSP will continue to closely monitor monetary conditions to ensure that domestic liquidity levels remain in line with the BSP’s price and financial stability objectives,” the BSP said.
Bank lending growth—one of the main drivers of the cash-supply movement in the economy— was contrastingly slower in January, reports from the BSP said.
The outstanding loans of commercial banks expanded at a slower rate of 19.1 percent in January from the revised 19.4 percent in December.
Loans for production activities— which comprised 88.4 percent of banks’ total loan portfolio, net of RRP—grew by 18.1 percent in January, slower compared to the revised 18.6-percent growth in December 2017.
The BSP said the movement in production loans was driven primarily by increased lending to the following sectors: Real-estate activities at 18 percent; electricity, gas, steam and air-conditioning supply at 24.8 percent; wholesale and retail trade, repair of motor vehicles and motorcycles at 13.2 percent; manufacturing at 11.9 percent; information and communication at 52.6 percent; and financial and insurance activities at 15 percent.
Bank lending to other sectors also increased during the month, except in agriculture, forestry and fishing, which declined by 11.6 percent, and administrative and support services activities, which was down 43.2 percent.
Growth in loans for household consumption also slowed down to 20.3 percent in January from the revised 20.8 percent in December 2107.
The BSP attributed the slower increase to the low growth of motor-vehicle loans, salary-based general purpose loans, and other types of household loans, which offset the faster expansion in credit-card loans during the period.