Bank lending, money supply rise amid stable liquidity

Domestic liquidity in the Philippine economy grew by 6.3% year-on-year in June 2025, reaching about PHP18.6 trillion, signaling continued support for economic activity amid the Bangko Sentral ng Pilipinas’ (BSP) cautious monetary stance.

The figure, up from 5.5% in May, reflects a steady expansion in money circulating in the system—from currency and bank deposits to liquid financial instruments.

After seasonal adjustment, domestic liquidity, measured as M3, rose by 1.2% month-on-month in June.

M3 is considered the broadest measure of money supply in the Philippines, encompassing cash, demand deposits, savings, and easily convertible assets.

According to the BSP, the sustained growth in M3 supports the economy’s financing needs while staying in line with the central bank’s monetary policy and inflation targets.

“The BSP will continue to ensure that domestic liquidity conditions remain consistent with the prevailing stance of monetary policy, in line with its price and financial stability objectives,” the central bank said.

The main contributor to M3 expansion was credit growth.

Claims on the domestic sector—which include loans to both the public and private sectors—rose by 10.7% in June, maintaining the same pace as May.

Claims on the private sector grew faster at 11.3%, compared with 10.9% in the previous month, driven by increased bank lending to households and non-financial private corporations.

Net claims on the central government also expanded, increasing by 7.5% from 9.1%, due to higher government borrowings.

Meanwhile, net foreign assets (NFA) declined by 1.7% year-on-year in June, following a 4.6% drop in May.

The BSP’s own NFA fell by 2.7% due to the appreciation of the Philippine peso against the US dollar, which reduced the peso value of its foreign reserves.

On the other hand, banks’ NFAs rose, attributed to greater holdings of foreign currency-denominated debt instruments.

The expansion of domestic liquidity was complemented by robust bank lending.

Preliminary BSP data show that outstanding loans issued by universal and commercial banks (U/KBs) rose by 12.1% year-on-year in June, accelerating from 11.3% in May.

Seasonally adjusted data showed a 1.2% month-on-month increase in outstanding bank loans.

Outstanding loans to residents climbed by 12.6%, while loans to non-residents fell by 6.4%, following a similar decline in May.

Loans for business activities grew by 11.1%, with notable lending increases in real estate (9.9%), electricity and utilities (29.2%), financial services (12.0%), and transportation and storage (15.9%).

Consumer lending also posted strong growth at 24.0%, up from 23.7% in May, as Filipinos continued to rely on credit cards, car loans, and salary-backed loans for personal financing.

The BSP emphasized that bank lending plays a central role in the transmission of monetary policy—affecting everything from consumption to investment—and is crucial for sustaining domestic demand.

Analysts view the solid growth in both liquidity and credit as a sign of resilience in the Philippine banking system and a positive indicator for sustained economic expansion, particularly amid softening inflation.

However, the central bank remains watchful of external risks, such as capital outflows and currency volatility, that could disrupt liquidity conditions.