Money supply expands 13.5% in February

MANILA, Philippines — More money circulated in the country’s economy in February as lending grew a tad faster, the Bangko Sentral ng Pilipinas reported Wednesday.

Domestic liquidity or M3, the broadest measure of money supply in the financial system, expanded by 13.5 percent to P10.7 trillion last month, faster than the 12.8 percent growth posted in January.

On a month-on-month seasonally-adjusted basis, M3 spiked by 1.5 percent.

Domestic claims surged by 13.8 percent in February, slightly higher than the revised 13.6 percent jump in January on the back of sustained growth in bank lending.

Net foreign assets in peso terms likewise grew last month, although at a slower pace, at 4.6 percent from 4.9 percent (revised) in the previous month, with foreign exchange inflows coming mainly from overseas Filipinos’ remittances and business process outsourcing receipts.

In a statement, the BSP said the growth in M3 remains consistent with the prevailing outlook for inflation and economic activity.

“Nevertheless, the BSP will continue to closely monitor domestic liquidity to ensure that monetary conditions remain conducive to maintaining price and financial stability,” the central bank said.

Bank lending

Separately, the BSP said bank loans expanded at a slightly faster rate of 19.5 percent in February. Last January, growth was at 19.0 percent.

Month-on-month, credit expansion stood at 1.8 percent.

Computed to include reverse repurchase agreements entered into by banks, total lending decelerated to 17.6 percent last month from 18.4 percent.

Broken down, data showed loans for production activities rose 18.6 percent, while those for household consumption slowed down to 19.9 percent.

“The BSP will continue to ensure that the expansion in domestic credit and liquidity proceeds in line with overall economic growth while remaining consistent with the BSP’s price and financial stability objectives,” the central bank said.

The BSP watches money supply level as too much credit could fuel demand that may stoke inflation and financial bubbles.

When needed, the monetary authority tries to lure more funds to reverse repurchase agreements, where banks purchase government securities from the BSP resulting in contraction in their level of reserves.

Last month, the central bank announced a 1 percentage point cut in the amount of reserves lenders need to park with the central bank, a move that could inject about P90 billion in the economy and allow banks to lend more to different sectors.

The reserves reduction took effect on March 2.