Domestic liquidity (M3) in the month of May grew by 16.3 percent year-on-year to reach P5.3 trillion, the Bangko Sentral ng Pilipinas (BSP) said on Friday.
In a statement, the BSP said that the growth was faster relative to the 13.3-percent revised expansion recorded in the previous month.
On a monthly basis, seasonally adjusted M3 also expanded at a faster pace of 2.6 percent, compared to the 2-percent growth in April.
The central bank added that the growth of money supply was driven largely by the sustained expansion in net domestic assets or NDAs, which increased by 28.2 percent in May because of the continued increase in credits to the private sector, reflecting the robust lending activity of commercial banks.
Meanwhile, it also reported that claims on the private sector increased by 15.4 percent in May, while claims on the public sector grew by 8.3 percent in May
However, the BSP noted that net foreign assets (NFA) moderated to 0.9 percent in May from the revised 2.9 percent in April.
“The BSP’s NFA position increased by 4.4 percent, on the back of steady foreign exchange in flows from overseas Filipino’s remittances, portfolio investments and BPO [business process outsourcing]receipts,” it explained.
The central bank noted that the NFA of banks declined further as banks’ foreign liabilities continued to increase, because of higher placements and deposits made by foreign banks with their local branches and other banks, while their foreign assets continued to decrease because of the decline in their loan receivables from and deposits with foreign banks.
“The continued expansion in domestic liquidity during the month indicates sufficient liquidity to sustain the economy’s growth momentum. Going forward, the BSP will monitor monetary conditions closely to ensure that liquidity in the financial system remains supportive of economic activity while ensuring low and stable inflation,” it stated.
Bank lending expands
On the other hand, the BSP also reported that the total outstanding loans of commercial banks, net of banks’ reverse repurchase placements (RRP) with the BSP, expanded at a faster pace of 13.1 percent in May relative to the growth of 12 percent in April.
However, bank lending inclusive of RRPs decelerated to 13.1 percent from 13.7 percent in the previous month.
On a month-on-month seasonally adjusted basis, commercial bank lending in May increased by 0.6 percent for loans net of RRPs, but loans inclusive of RRPs dropped by 0.2 percent.
Loans for production activities—which comprised more than four-fifths of banks’ aggregate loan portfolio—grew to 13.3 percent in May from 12.0 percent in April.
On the other hand, the BSP said that the growth of consumer loans rose slightly to 11.7 percent in May from 11.5 percent, because of the expansion across all types of household loans.
The central bank explained that the expansion in production loans was driven by increased lending to following sectors: real estate, renting and business services (24.3 percent); wholesale and retail trade (13.0 percent); electricity, gas and water (14.8 percent); financial intermediation (13.0 percent) and manufacturing (5.2 percent).
“The continued brisk growth in bank landing suggests adequate funding for domestic economic activity in the months ahead,” the BSP said.