Domestic money supply picks up slowly as bank lending falls


The Bangko Sentral ng Pilipinas (BSP) announced on Monday that the country’s money supply rose at a slower pace in April as the coronavirus disease 2019 (Covid-19) pandemic continues to drag bank lending.


The domestic liquidity’s (M3) increased by 5.1 percent year-on year-to P14.2 trillion in the fourth month of the year, easing from the 8.3 percent jump in March, according to a statement released by the BSP on Monday. M3 saw an uptick of 0.5 percent month over month and seasonally adjusted.


It stated net claims on the central government climbed 23.6 percent in April, a moderation from a 47.4 percent surge in March, due in part to the national government’s sustained borrowings.


Meanwhile, bank lending fell 5 percent, sustaining the 4.5-percent reduction a month ago. Commercial bank loans plunged 0.30 percent month over month and seasonally adjusted.


Net of reverse repurchase, loans to residents slid by 4.5 percent, while outstanding loans to nonresidents slipped by 20.2 percent.


“Bank lending remained weak as measures to contain the resurgence in Covid-19 cases constrained domestic economic activity and continued to dampen market sentiment,” the central bank said.


Lending for production activities declined further by 3.9 percent from the 3.2-percent decrease in March, as outstanding loans to these sectors continued to dip: wholesale and retail trade and repair of motor vehicles and motorcycles (-10.2 percent), manufacturing (-9.8 percent), and financial and insurance activities (-6.8 percent).


Meanwhile, the expansion in loans to professional, scientific and technical activities (106.9 percent), real estate activities (2.4 percent), and human health and social work activities (8.5 percent) helped to offset the drop.


“Going forward, the BSP’s key priority is to preserve policy support to facilitate the recovery of the domestic economy” the BSP said.


In accordance with its pricing and financial stability mandates, the Bangko Sentral assured it is prepared to take appropriate actions as needed to ensure favorable financing conditions in support of domestic economic activity and market sentiment.


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