Money supply growth slackens
By Doris Dumlao
Philippine Daily Inquirer
First Posted 05:07:00 10/01/2008
Filed Under: Economic Indicators, Central Banks
MANILA, Philippines--The supply of money in the domestic economy expanded by a slower pace in July even though commercial bank lending sustained a double-digit growth following the central banks’ decision to jack up interest rates to counter inflation.
Year-on-year growth in the country’s domestic liquidity, or m3, slowed down to 4.1 percent in July from 5.1 percent in June.
Despite the slower growth in money supply, the volume of loans disbursed by commercial banks grew by a hefty 23.9 percent in the same period over a year ago, although it was slightly down from the 24.2 percent year-on-year growth in June.
Domestic liquidity is used to estimate the entire supply of money circulating within an economy. It includes cash in circulation, demand deposits, money market funds and short-term securities buyback agreements.
The expansion in domestic liquidity, or broad money supply, was driven by the 12.5-percent increase in net foreign assets held by banks, although lower than the 17.7-percent growth in June.
Net domestic assets — like credit, deposits and other receivables — grew by a marginal 0.4 percent in July from the 1.5-percent rise in June, due to a decline in public sector borrowings.
In contrast, loans to the private sector surged by 12.8 percent in July from 11.8 percent in June.
Governor Amando Tetangco Jr. of the central bank said the 23.9-percent overall year-on-year growth in commercial bank lending as of July was matched by an 18.5-percent growth in loans net of banks’ short-term lending to the central bank.
“These developments indicate that liquidity in the financial system remains ample, providing the financial resources necessary for sustaining economic growth,” Tetangco said.
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