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Money supply growth slows anew
Preliminary data from the central bank showed that domestic liquidity, as measured by M3, grew by 10.5 percent to P13.68 trillion in November last year from P 12.38 trillion in the same month in 2019.
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Money supply growth slows anew

Mary Grace Padin (The Philippine Star) - January 15, 2021 - 12:00am

MANILA, Philippines — The growth in the country’s money supply continued to ease for the sixth consecutive month in November 2020 as credit demand remained weak amid a pandemic-induced slowdown in business activities and consumer spending, the Bangko Sentral ng Pilipinas (BSP) said yesterday.

Preliminary data from the central bank showed that domestic liquidity, as measured by M3, grew by 10.5 percent to P13.68 trillion in November last year from P 12.38 trillion in the same month in 2019.

This was, however, slower than the 11.6 percent expansion recorded in October 2020.

“Domestic claims grew by 6.7 percent year-on-year in November from eight percent (revised) in the previous month as bank lending remained weak,” the BSP said.

The growth in loans for production activities, as well as consumer lending both declined during the period under review.

Net borrowings by the central government expanded by 40.7 percent, albeit at a slower pace than the 46.6 percent recorded in October last year due in part to the sustained borrowings of the national government.

Meanwhile, the growth in net foreign assets (NFA) slowed down to 22.9 percent from 23.3 percent.

“The slower M3 growth in recent months may have partly reflected some of the recent slowdown in loan demand amid slower economic or demand conditions after the COVID-19 pandemic and could be slowed down further by the new coronavirus strain,” Michael Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), said.

Still, Ricafort noted that M3 growth still sustained its double-digit level, signaling lingering excess peso liquidity in the financial system, brought about by the measures implemented by the BSP.

He said further monetary easing measures were still possible, particularly through a cut in the banks’ reserve requirement ratio from the current 12 percent to sustain the economy’s recovery amid the threat of a new coronavirus strain.

Meanwhile, the BSP said loans extended by universal and commercial banks, net of reverse repurchase (RRP) placements, grew by 0.3 percent to P8.98 trillion in November 2020 from P8.95 trillion in the same period in 2019.

This was slower than the 1.8 revised growth figure in October last year, and marked the slowest pace of growth since bank lending declined by 1.9 percent in September 2006.

“Bank lending growth waned during the month as the COVID-19 crisis continued to dampen consumer spending and business activity,” the BSP said.

BSP data showed that loan growth for production activities inched up by 0.5 percent in November last year to P7.84 trillion from P7.8 trillion in the same month of the previous year. This was slower than the two percent growth posted in October 2020.

Loans to key industries further declined, including wholesale and retail trade, and repair of motor vehicles sector, whose loan availment dropped by six percent year-on-year. Loans to the manufacturing sector contracted by 4.2 percent.

On the other hand, disbursements to other industries improved, including the real estate sector (5.2 percent); electricity, gas, steam, and air conditioning supply (2.7 percent); human health and social work activities (45.3 percent); transportation and storage (8.1 percent); and information and communication (6.5 percent).

BSP data also showed that consumer loans expanded by 7.1 percent to P876.21 billion in November last year from P818.41 billion in the same month in 2019. This was, however, P7.9 percent slower than the 7.9 percent growth reported in October 2020.

The central bank attributed this to the slowdown in credit card loans and the continued contraction in motor vehicle loans

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