M3 growth slows further in July

MANILA, Philippines - Domestic liquidity growth decelerated further in July following the adjustments made by the Bangko Sentral ng Pilipinas on reserve requirement ratios and the special deposit account rate.

In a statement, the central bank said M3 – the broadest measure of liquidity –grew 18.3 percent to P7.14 trillion in July. The expansion rate was slower than the revised 23.3 percent recorded in June and the 28.4 percent in May.

This is the slowest pace after the 15.8 percent expansion in May 2013. Domestic liquidity growth jumped to 30 percent in July last year and remained above that level until April this year.

Domestic claims during the month went up 13 percent to P6.44 trillion 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.

Public sector credit fell to 4.1 percent to P1.05 trillion in July amid increased deposits of the government with the BSP made up of proceeds from the auction of government securities and revenue collections.

Net foreign assets, meanwhile, climbed 1.9 percent to P3.62 trillion during the month.

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

“Going forward, the BSP remains prepared to deploy all necessary measures to ensure that liquidity dynamics stay consistent with the BSP’s objective of maintaining price and financial stability,” the BSP added.

Meanwhile, the BSP said the lending by universal and commercial banks less their placements with the central bank grew 21.8 percent to P4.08 trillion in July, faster than the previous month’s 20.1 percent.

Together with placements with the BSP, lending rose 20.4 percent to P4.34 trillion in July, accelerating from the 18.7 percent recorded in June.

 “The continued expansion in bank lending suggests that the momentum of domestic economic activity remains strong,” the central bank said.

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

The funds largely went into real estate (P717.473 billion); manufacturing (P635.215 billion); wholesale and retail trade (P576.245 billion); electricity, gas and water (P419.077 billion); and financial intermediation (P360.254 billion).