M3 money supply up 7.7% at P18.8T
Lending by Philippine banks posted double-digit growth in December, rising 12.2 percent to hit P13.138 trillion from P11.705 trillion a year earlier, data from the Bangko Sentral ng Pilipinas (BSP) showed.
Outstanding loans to residents reached P13.188 trillion in December, while outstanding loans to non-residents expanded to P330 billion.
Of the total, loans for production activities rose 10.8 percent to P11.216 trillion from P10.119 trillion.
Consumer loans to residents grew 25 percent, reaching a total of P1.591 trillion, from P1.273 trillion in the comparative period.
Growth in consumer loans was driven by increases in credit card loans; salary-based general purpose consumption loans and motor vehicle loans.
The BSP said it will “ensure that domestic liquidity and bank lending conditions remain consistent with its price and financial stability objectives.”
The December outturn of 12.2 percent was the best lending growth rate since December 2022. It was also more than twice the growth recorded by the economy in terms of gross domestic product at 5.2 percent in the last quarter of 2024, RCBC chief economist xxx Ricafort said.
“Going forward, lower local interest rates would fundamentally help further spur faster growth in demand for loans that, in turn, would support faster GDP growth,” Ricafort said in a Viber message yesterday.
He said the pace of bank-loan growth in recent months could be attributed to better business and economic conditions such as improved data on employment, an easing inflation trend and sustained GDP growth.
“The continued recovery of foreign and local tourism, MSMEs, other services and many other businesses that were hit hard by the pandemic increases the confidence of more consumers and other institutions to take out loans. All of these factors improved their ability to pay their loans,” Ricafort said.
Money supply grows
The BSP, in a separate statement, said domestic liquidity — M3 or money supply that measures the total amount of money in circulation — rose 7.7 percent to P18.8 trillion in December last year.
The central bank noted that claims on the private sector grew “with the continued expansion in bank lending to non-financial private corporations and households.”
M3 comprises currency in circulation plus bank deposits and deposit substitutes, such as commercial papers and promissory notes.
“M3 growth picked up largely after the latest cut in the banks’ reserve requirement ratio (RRR) that took effect in October 2024 and infused about P400 billion in additional peso liquidity into the banking system that may allow banks to increase lending and other investing activities,” Ricafort said.
The BSP signalled a further cut in banks’ RRR by as much as 200 basis points as early as middle of this year. If it materializes, the banks’ RRR will go down to 5 percent from the current 7 percent.
Ricafort said this move could infuse about P330 billion into the banking system and could lead to faster M3 growth.
Ricafort said bank-loan growth tends to be faster as compared to M3 growth during better economic conditions.
However, he said, M3 growth tends to be higher than bank-loan growth during economic downturns amid the infusion of more liquidity into the financial system by monetary authorities through various monetary easing measures.
