MANILA, Philippines – Lending slowed and money supply eased in August, latest data from the Bangko Sentral ng Pilipinas (BSP) show.
These developments, economists and observers said, heighten the likelihood of more monetary policy adjustments before the year is out and a validation of forecasts made by the global lender HSBC, for example, that more fine-tuning may be necessary to optimize anticipated growth of up to six percent in terms of the gross domestic product.
According to the BSP, lending continued to grow but at a slower pace of only 14 percent in August versus 16 percent the previous month.
This developed as the country’s exports, a key growth driver, contracted by 9 percent in August from growth of 6 percent in July.
Slowing export growth also came at a time when money supply growth, known as M3 among economists, also slowed to only 6.2 percent in August from an 8.7- percent expansion the previous July.
All these numbers together boosted the likelihood of another round of monetary policy easing down the road and proves consistent with views held earlier by analysts at HSBC that the BSP may engage in more policy adjustments.
Two more rate-setting meetings have been scheduled this year, the first on Oct. 25 and the last for the year on Dec. 13.
The regional chief economist of rival lender Citigroup, Johanna Chua, also anticipated a similar policy adjustment down the line, given the country’s growth and inflation dynamics that in her view require further policy support.
BSP Gov. Amando M. Tetangco Jr. in Japan on Wednesday was quoted by newswires as having hinted of another round of policy adjustments, citing “benign inflation outlook this year and next” for the Philippines.
The benign outlook on inflation gives the monetary authorities “monetary policy space” within which to make appropriate adjustments.
Latest loan data suggest a slowing down and money supply have similarly eased, totaling only P4.6 trillion at end-August.
Nevertheless, the BSP said loan activities should remain robust in the coming months at volumes consistent with that required to boost domestic demand.
“The BSP will continue to monitor liquidity conditions to ensure that credit activity remains supportive of overall economic growth while remaining consistent with the BSP’s price stability objective,” the BSP said in a statement.