Domestic liquidity growth quickens to 12.8%

Domestic liquidity, or M3, grew 12.8% year-on-year to PHP 20.6 trillion in May, as sustained borrowing by both the private and public sectors continued to support money supply expansion, the Bangko Sentral ng Pilipinas said.

The BSP said the increase in domestic liquidity helps support economic activity by facilitating consumption, lending, and investment.

The May growth was faster than the previous month’s expansion, with domestic claims rising 13.3% year-on-year from 12.7% in April.

M3 is a broad measure of money supply that includes currency in circulation, bank deposits, and other financial assets that are readily convertible to cash.

Credit to production sectors and households, mostly in the form of bank loans, continued to expand and support economic activity.

Loans to production sectors and households made up 97% of claims on the private sector, which grew 13.2% in May from 12.6% in April.

The national government’s issuance of debt securities and withdrawal of deposits from the BSP and banks to finance spending also contributed to domestic liquidity growth.

These transactions fall under net claims on the central government, which increased 16.2% in May from 15.1% in April.

Higher net foreign assets also contributed to M3 growth.

Net foreign assets refer to the difference between claims on nonresidents and liabilities to nonresidents of depository corporations.

The BSP’s net foreign assets expanded 8.2%, while banks’ net foreign assets also grew, largely due to increased holdings of foreign currency-denominated debt securities.

M1, a narrower measure of money supply made up of currency in circulation and current account deposit liabilities, rose 9.5% year-on-year in May, also faster than the growth recorded in April.

The BSP said it will continue to ensure that domestic liquidity conditions remain consistent with its price and financial stability objectives.