Both bank lending and domestic liquidity grew in May despite high interest rates and inflation, Bangko Sentral ng Pilipinas said on Friday, July 12.
Preliminary data released by the BSP showed that outstanding loans of commercial banks, net of reverse repurchase (RRP) placements with the central bank, grew by 10.1 percent year-on-year in May from 9.6 percent in April.
The amount of outstanding commercial and universal bank loans, net of RRPs, increased by 1.1 percent on a monthly seasonally adjusted basis.
However, the outstanding loans to non-residents reached 8.1 percent in May, slower than the 10.8 percent in April. Outstanding loans to residents, net of RRPs, increased by 10.2 percent in May from 9.6 percent in April.
Interest rates on RP transactions are known as RRPs, and they are normally contracted between banks and the BSP. Additionally, RRPs could grow on term maturities or overnight.
Outstanding loans for production activities grew by 8.4 percent in May from 7.8 percent in April, due to the increase in loans to major sectors including real estate activities (13.2 percent); wholesale and retail trade, and repair of motor vehicles and motorcycles (11.1 percent); manufacturing (10.1 percent); transportation and storage (26.7 percent); and electricity, gas, steam, and airconditioning supply (7.7 percent).
Similarly, consumer loans to residents expanded by 25.6 percent in May from 25.3 percent in April, driven mainly by the increase in credit card, motor vehicle, and salary-based general-purpose consumption loans.
“Looking ahead, the BSP will ensure that domestic liquidity and credit conditions remain in line with its price and financial stability objectives,” BSP said.
Domestic liquidity up
Another preliminary data from BSP showed that the domestic liquidity (M3) increased from 5.6% in April to P17.4 trillion in May, representing a 6.5 percent year-over-year growth. Seasonally adjusted, M3 grew by roughly 1.1 percent month on month.
M3 is the total number of money in circulation within an economy, including money outside of banks as well as time and demand deposits, as well as cash and cash-equivalent securities.
Domestic claims, as revised, grew by 10.7 percent year-on-year in May similar to the previous month.
Due to the ongoing increase in bank lending to non-financial private firms and consumers, claims on the private sector increased by 11.6 percent in May from 10.9 percent (revised) in April.
Net claims against the national government increased by 12.2 percent from 13.9 percent on the back of the National Government’s sustained borrowing.
In peso terms, net foreign assets (NFA) increased from 2.1 percent in April to 4.9 percent in May on an annual basis. NFA for the BSP increased by 8.6 percent. Bank NFAs shrank in the interim because to increased bills and bonds due.
“The BSP will continue to ensure that domestic liquidity conditions remain consistent with the prevailing stance of monetary policy, in line with its price and financial stability objectives,” the Central Bank said. (TCSP)
