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NEWS UPDATES 8 August 2009

Philippine economy kept steady as money supply grows

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Philippine economic activities remained steady, muting recession threats, as the amount of cash in the financial system and loans extended by banks continued to grow in June this year, reported GMA.TV news.

Domestic liquidity – also known as M3, which measures the amount of cash in the system – rose 12.58 percent in June and is 1.27 percent higher than last month’s results, the Bangko Sentral ng Pilipinas (BSP) said.

However, June’s growth rate is slower than May’s, which reached 15 percent year on year.

“The continued strong growth of money supply indicates that the liquidity-enhancing measures earlier implemented by the BSP have continued to work their way through the banking system to ensure ample funding for the requirements of the economy," BSP Officer-in-Charge Nestor A. Espenilla, Jr. said

Ample money supply encourages banks to lend more, prompting businesses to expand and thus hire more workers and consumers to spend more.

Higher net foreign assets continued to drive the growth of liquidity although it slackened at 17.6 percent from 19.8 percent in May following slower build-up in the BSP’s international reserves despite banks’ declining foreign obligations.

Growth in net domestic assets – government assets owned abroad minus foreign-owned local assets – went down to 3.2 percent in June from 8.4 percent in May as net domestic credit growth decelerated to 15.2 percent from 18.3 percent.

Meanwhile, the increase in loans extended to the private sector by commercial banks remained strong, reaching P2.2 trillion in June, 11.1 percent higher than last year.

Delay in credit expansion to the government, local government units, and other public entities led to slower growth in credit extended to the public sector at 15.2 percent than 18.7 percent in May.

Net of reverse repurchase placements (RRP) with the BSP, growth in bank lending remained strong at 14.3 percent albeit slower than the 17.3 percent growth posted in the previous month.

On a month-on-month basis, commercial banks’ seasonally-adjusted lending in June grew by 4.5 percent for loans inclusive of RRP placements, but fell by 0.3 percent net of RRP placements.

Loans for production activities went up by 14.4 percent year-on-year in June but slower than the 17.1 percent growth in May.

Major contributors to lending growth were agriculture, hunting, and forestry; real estate, renting and business services; transportation, storage and communication; electricity, gas and water; and financial intermediation.

Other sectors that enjoyed higher loans were wholesale and retail trade; other community, social and personal services; public administration and defense; health and social work; fishing; and mining and quarrying.

Banks lent 12.6 percent less to manufacturing, which accounted for 15.2 percent of total loans, due to adverse impact of the global financial crisis on export growth, while the construction loans remained negative at 12.5 percent due to weak demand for housing projects and new office spaces.

Growth in consumption loans eased off to 7.2 percent this month from 9.6 percent in the previous month due to slower growth in auto loans, credit card lending, and the continued contraction in other types of consumption loans.


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