Money supply and bank lending both grew faster in February, the Bangko Sentral ng Pilipinas (BSP) reported on Wednesday.

Domestic liquidity or M3 expanded by 13.5 percent year on year to P10.724 trillion, up from January’s 12.8 percent. Month-on-month and seasonally adjusted, M3 increased by 1.5 percent.

“The growth in M3 remains consistent with the BSP’s prevailing outlook for inflation and economic activity,” the central bank said in a statement.

Domestic claims growth, meanwhile, picked up to 13.8 percent from January’s revised 13.6 percent as bank lending rose.

“Growth in bank loans continued to be driven by lending to key production sectors such as real estate activities; electricity, gas, steam and air-conditioning supply; wholesale and retail trade, repair of motor vehicles and motorcycles; manufacturing; financial and insurance activities; and information and communication,” the BSP said.

Net claims on the central government grew at a steady pace of 3.7 percent from a revised 3.6 percent as a result of increased borrowings.

Net foreign assets (NFA) in peso terms, meanwhile, saw growth slow to 4.6 percent from the previous month’s revised 4.9 percent.

The central bank said its own NFA position increased in February, reflecting foreign exchange inflows coming mainly from overseas Filipinos’ remittances and business process outsourcing revenues.

The NFA of banks, meanwhile, also expanded at a faster pace as growth in banks’ foreign assets increased on account of higher loans and investments in marketable debt securities.

Commenting on the February data, Land Bank of the Philippines market economist Guian Angelo Dumalagan told The Manila Times that domestic liquidity growth remained healthy.

“The growth in M3 is within the healthy range of 13 percent to 14 percent. Ample domestic liquidity in the system is keeping [interest]rates relatively low, fueling the demand for credit,” he explained.

In the near term, he said money supply was expected to grow much faster following the BSP’s one percentage point cut in the bank reserve requirement ratio to 19 percent.

“Banks’ additional deployable funds could find their way to loans, as loans offer relatively higher interest rates than the BSP’s facilities,” Dumalagan said.

Outstanding loans

Bank lending growth, meanwhile, accelerated to 19.5 percent from January’s revised 19 percent.

Including reverse repurchase placements (RRPs) with the central bank, growth decelerated to 17.6 percent from the previous month’s revised 18.4 percent. Month-on-month and seasonally-adjusted, commercial bank lending for loans net of RRPs and loans inclusive of RRPs both increased by 1.8 percent and 1.1 percent, respectively.

Lending for production activities, which accounted for 88.4 percent of the aggregate loan portfolio, grew by 18.6 percent in February.

This was driven by real estate activities (18.1 percent); electricity, gas, steam and air-conditioning supply (28.5 percent); wholesale and retail trade, repair of motor vehicles and motorcycles (18.5 percent); manufacturing (10.7 percent); financial and insurance activities (15.3 percent); and, information and communication (28.8 percent).

Bank lending to other sectors also increased during the month except in agriculture, forestry and fishing (-11.4 percent), and administrative and support services activities (-40.0 percent).

Household consumption loan growth decelerated to 19.9 percent from January’s revised 20.2 percent.

“The slower increase in motor vehicle loans and contraction in other types of household loans offset the faster expansion in credit card loans and salary-based general purpose loans in February,” the central bank said.