The Philippine economy demonstrated continued vitality in April, fueled by healthy expansion in both domestic liquidity and bank lending. New data released today paints a picture of sustained financial momentum, underscoring the resilience of the country’s economy.
Preliminary figures reveal that domestic liquidity (M3), the total money circulating in the financial system, grew by a strong 5.8 percent year-on-year, reaching approximately ₱18.2 trillion.
While a slight moderation from the revised 6.2 percent growth in March, this sustained expansion indicates ample funds for economic activities. On a month-on-month, seasonally adjusted basis, M3 saw a marginal 0.1 percent increase, reflecting a stable and controlled monetary environment.
Complementing this, the outstanding loans of universal and commercial banks (U/KBs), net of reverse repurchase (RRP) placements with the Bangko Sentral ng Pilipinas (BSP), expanded by a solid 11.2 percent year-on-year in April. This follows an 11.8 percent growth for the Philippine economy in March, showcasing continued strong credit demand.
On a month-on-month seasonally-adjusted basis, U/KB loans, net of RRPs, increased by 0.3 percent.
This dual growth in money supply and credit signals a dynamic economic landscape, with both businesses and consumers actively participating in investment and consumption. The BSP continues its vigilant oversight, ensuring these financial conditions remain consistent with its core objectives of price stability and financial system health of the country’s economy.
Credit as engine of PH economy: Bank lending fuels economic activity
The sustained growth in bank lending is a crucial indicator of economic vigor. Outstanding loans to residents, net of RRPs, grew at a slightly slower rate of 11.9 percent in April compared to 12.4 percent in March, yet still reflecting robust demand.
Meanwhile, outstanding loans to non-residents experienced a larger decline, decreasing by 10.0 percent in April after a 5.6 percent fall in the previous month.
Loans directed towards production activities saw a 10.3 percent increase in April, slightly easing from 10.8 percent in March. This indicates that businesses are still actively borrowing to invest in expansion and operational needs. While the growth eased, key industries continued to receive significant lending:
- Real estate activities: 8.9 percent
- Wholesale and retail trade, repair of motor vehicles and motorcycles: 9.9 percent
- Manufacturing: 0.6 percent
- Financial and insurance activities: 7.5 percent
- Information and communication: 7.7 percent
- Transportation and storage: 14.9 percent
This diversified lending across various sectors underscores a broad-based economic recovery and ongoing development.
On the consumer front, consumer loans to residents exhibited particularly strong growth, accelerating to 24.0 percent in April from 23.9 percent in March. This impressive surge was primarily driven by the sustained increase in credit card loans, indicating a healthy consumer appetite for spending and a return to pre-pandemic purchasing patterns.
Domestic claims and net foreign assets: A balanced picture
Beyond bank lending, the expansion in domestic claims also played a significant role in M3 growth, surging by 10.9 percent year-on-year in April.
This was largely propelled by the private sector, whose claims grew by 11.4 percent, buoyed by the sustained expansion in bank lending to both non-financial private corporations and households.
The national government’s increased borrowings also contributed, leading to a 9.4 percent rise in net claims on the central government.
Conversely, Net Foreign Assets (NFA) in peso terms saw a marginal decrease of 0.2 percent year-on-year in April. While the BSP’s NFA saw a slight 0.1 percent increase, banks’ NFA declined, primarily due to higher foreign currency-denominated bills payable.
This indicates a dynamic interplay of international financial flows, though domestic factors remain the primary drivers of overall liquidity.
BSP’s commitment to stability
Looking ahead, the BSP remains steadfast in its commitment to prudent monetary management. It remains committed to ensuring that domestic liquidity and bank lending conditions remain aligned with its price and financial stability mandates.
This commitment highlights the central bank’s proactive approach to fostering a stable and growth-conducive financial environment, ensuring the sustained health and stability of the nation’s financial system in the months to come. The robust April figures provide a strong foundation for continued economic expansion and stability in the Philippines.