The growth in the amount of money in the economy eased in December as liquidity levels normalized following the withdrawal of funds from the central bank’s special deposit accounts (SDA).
Data from the Bangko Sentral ng Pilipinas (BSP) showed that the growth in domestic liquidity or M3 slowed to 32.7 percent in December from a record high of 36.5 percent in November.
Money supply growth was slower despite an acceleration in lending by the country’s major banks to cater to the higher demand for credit from households and businesses, fueled by the growing economy.
“The slower pace of increase in money supply is consistent with the expected normalization of M3 growth over the coming months following the completion of the operational adjustments in the BSP’s SDA facility in November,” the regulator said in a statement.
A ban on individual investors from parking money in SDAs took effect last December, as the BSP sought to refine the window, which was originally devised as a tool to mop up excess cash from the economy.
The bulk of the cash withdrawn from SDAs—around P800 billion—was transferred to time deposit accounts in local banks. Part of the money was also used to buy government securities, particularly the P150 billion in retail treasury bonds issued last year.
The BSP said M3 growth rates were expected to decline further in the coming months to normal levels when growth is driven by the expansion of the economy.
The central bank said it would “continue to assess monetary conditions closely to ensure that liquidity dynamics stay supportive of economic activity.”
Meanwhile, data released on Thursday showed outstanding loans of the country’s universal and commercial banks rose by 16.4 percent in December, faster than November’s 14.8 percent.
Inclusive of placements with the BSP, bank lending rose by 16.3 percent or better than the 13.8 percent recorded the month before.
The bulk of these loans or four-fifths went to companies in so-called “productive sectors of the economy,” including real estate, renting and business services, electricity, gas, and water, manufacturing, wholesale and retail trade, and construction.
“The sustained expansion in bank lending is expected to support the continued positive outlook of the domestic economy for the year ahead,” the BSP said.