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PH economy kicks off 2017 with robust liquidity, bank lending

FLOWING. Money and credit continue to expand in the Philippine economy in January 2017. File photo by Jes Aznar/AFP

MANILA, Philippines – The country’s financial sector began 2017 with domestic liquidity and bank lending both sustaining the gains seen last year.

Preliminary data released by the Bangko Sentral ng Pilipinas (BSP) on Tuesday, February 28, showed that domestic liquidity (M3) grew by 12.4% year-on-year to P9.4 trillion in January 2017, although this growth was slightly lower than the revised 12.7% expansion in December 2016.

On a month-on-month seasonally-adjusted basis, M3 increased by 1.6%.

Demand for credit remains the principal driver of money supply growth as domestic claims grew by 15.9% in January from the revised 17.0% in December. This was due largely to sustained growth in credit to the private sector, the BSP said.

It added that growth in bank loans was sustained by key production sectors including real estate, wholesale and retail trade, repair of motor vehicles and motorcycles, financial and insurance, electricity, utilities, and manufacturing.

Meanwhile, net claims expanded by 19.2% for January as a result of the continued withdrawal by the national government of its deposits with the BSP as part of its cash operations.

Net foreign assets (NFA) in peso terms grew by 8.7% year-on-year in January from the revised 7.8% in December.

The BSP said foreign exchange inflows coming from overseas Filipinos’ remittances, business process outsourcing receipts, and portfolio investments were the main factors behind the increase in the central bank’s NFA position.

Banks’ NFA also expanded due mainly to the growth in banks’ foreign assets resulting from higher inter-bank loans, deposits with other banks, and investments in marketable debt securities.

The BSP noted that growth in M3 remains consistent with its prevailing outlook for inflation and economic activity. Inflation for January hit 2.7%, a level higher than at anytime last year.

Bank loans up

Consistent with liquidity growth, loans by the country’s banks were also up.

Data showed that outstanding loans of commercial banks, netting out reverse repurchase (RRP) placements with the BSP, grew by 17.9% in January from the revised 17.3% in December.

Bank lending inclusive of RRPs also expanded by 16.2% from the revised 16.1%.

On a month-on-month seasonally-adjusted basis, commercial bank lending for loans net of RRPs and loans inclusive of RRPs increased by 1.8% and 1.6%, respectively.

Loans for production activities – which comprised about 89.2% of banks’ aggregate loan portfolio, net of RRP – grew by 17.5% in January from the revised 16.9% in December.

The growth in production loans was driven primarily by increased lending to the following sectors: real estate activities (18.7%); wholesale and retail trade, repair of motor vehicles and motorcycles (20.6%); financial and insurance activities (25.1%); electricity, gas, steam, and airconditioning supply (15.8%); and manufacturing (8.5%).

Loans for household consumption also increased by 23.7% in January from the revised 23.4% in December. This was due to credit card loans as well as sustained growth in motor vehicle loans and salary-based general-purpose loans, offsetting the decline in other types of household loans.