Liquidity eases further in July

MANILA, Philippines (Xinhua) - Money supply in the Philippines continued to grow at a slower pace in July after monetary officials tweaked reserve requirements and interest rates, the local central bank said today.

The Philippine central bank said in a statement that domestic liquidity or M3 grew 18.3 percent to P7.14 trillion ($163.58 billion) in July. The M3 expansion last month was slower than the revised 23.3 percent seen in June and the 28.4 percent posted in May.

M3 expansion last month was also the slowest pace seen after the 15.8 percent hike recorded in May last year.

"The previous adjustments in reserve requirements as well as in interest rates on the special deposit account (SDA), reverse repurchase, and repurchase facilities are expected to continue to bring domestic liquidity growth in line with the pace of expansion of the real sector," the Philippine central bank said.

The local central bank said the increase in M3 was due largely to the sustained demand for credit in the domestic economy.

Domestic claims in July rose by 13 percent to P6.44 trillion ($147.54 billion) on the back of robust bank lending, the bulk of which were channeled to the real estate, renting, and business services, wholesale and retail trade, manufacturing, utilities, and financial intermediation sectors.

M3 growth went up by more than 30 percent in July last year after the local central bank slashed the SDA interest rate by 150 basis points and ordered investment management accounts in the facility withdrawn by end-November.

The Philippine central bank said the adjustments on the facility were made to flush out funds and encourage investors to put them in other instruments that would benefit the local economy.

Meanwhile, lending by universal and commercial banks less their placements with the local central bank grew 21.8 percent to P4.08 trillion ($93.47 billion) in July, faster than the previous month's increase of 20.1 percent.

Loans for production activities, which made up four-fifths of the total portfolio, increased 20.9 percent to P3.65 trillion ($83.62 billion) in July.

The funds largely went into real estate; manufacturing; wholesale and retail trade; electricity, gas and water; and financial intermediation.