Money supply also picks up
MANILA, Philippines - Bank lending in May grew at its fastest rate in more than two years, indicating steady expansion of the domestic economy, the Bangko Sentral ng Pilipinas (BSP) reported Monday.
Outstanding loans, net of banks' reverse repurchase placements with the BSP, grew 18.8% in May from a year ago to P2.54 trillion. The increase was the highest rate recorded since April 2009.
Likewise, loans including BSP placements grew at a faster rate of 20.6% in May after an 18% expansion in April.
"The steady pace of domestic economic activity and stable financial conditions supported the credit expansion in May," BSP governor Amando Tetangco Jr. said in a statement.
Loans extended to enterprises, which accounted for four-fifths of the outstanding, expanded at a faster pace of 20.5% in May compared to 15.7% a month earlier.
The industries that benefited the most from the growth in lending were construction, utilities, manufacturing, real estate, agriculture and forestry, wholesale and retail trade, and transportation and communication.
Growth in consumer loans, meanwhile, accelerated to 14.9% in May from 12.9% in April, due to the increase in credit card use, and more vehicle purchases.
Money supply up
The BSP said lending growth led to increased money supply (M3) in the system.
M3, or domestic liquidity, grew 8% in May against 7.3% in April.
M3 is a measure of money circulating in the economy. It is one of the indicators the central bank reviews when setting monetary policy because of its impact on inflation.
Last month, the BSP kept its key interest rates steady, but raised banks' reserve requirements by one percentage point to dampen liquidity pressures from strong capital inflows.
Tetangco said they were monitoring the impact of developments overseas on liquidity and inflation in the domestic market.
The BSP expects inflation to peak in the September quarter, and it said further policy tightening cannot be ruled out with upward risks to consumer prices still dominant.
Annual inflation in June was 4.6%, the highest since April 2009, based on the year 2000 basket of consumer goods.