Domestic liquidity rises 6.5% in May, BSP reports

By Francis Allan L. Angelo

Domestic liquidity (M3) in the Philippines grew by 6.5% year-on-year to approximately ₱17.4 trillion in May, up from 5.6% in April, according to preliminary data from the Bangko Sentral ng Pilipinas (BSP). On a month-on-month seasonally adjusted basis, M3 increased by 1.1%.

Often referred to as M3, domestic liquidity is a measure of the total amount of money available in an economy. It includes cash, bank deposits, and other liquid assets that can be quickly converted to cash.

An increase in domestic liquidity means more money is circulating within the economy, which can influence spending and investment activities.

The growth in domestic claims, which expanded by 10.7% year-on-year in May 2024, mirrored the previous month’s figures.

Notably, claims on the private sector saw an 11.6% increase in May, up from a revised 10.9% in April, driven by sustained bank lending to non-financial private corporations and households.

Net claims on the central government rose by 12.2%, slightly down from 13.9%, partly due to ongoing government borrowings.

Net foreign assets (NFA) in peso terms increased by 4.9% year-on-year in May, up from 2.1% in April. The BSP’s NFA grew by 8.6%, although the NFA of banks contracted due to higher bills and bonds payable.

The BSP remains committed to ensuring that domestic liquidity conditions align with its monetary policy stance, focusing on price and financial stability.

Bank Lending Expands

Preliminary data also indicated a 10.1% year-on-year growth in outstanding loans from universal and commercial banks (U/KBs), net of reverse repurchase (RRP) placements with the BSP, in May, up from 9.6% in April.

On a month-on-month seasonally adjusted basis, these loans increased by 1.1%.

Bank lending refers to the loans and credit extended by banks to individuals, businesses, and other entities. This can include personal loans, mortgages, business loans, and other forms of credit.

An increase in bank lending typically signals greater economic activity, as businesses expand and consumers spend more.

Outstanding loans to residents, excluding RRPs, grew by 10.2% in May, compared to 9.6% in April.

Loans to non-residents*, however, rose at a slower rate of 8.1% in May, down from 10.8% in April.

Loans for production activities expanded by 8.4% in May, up from 7.8% in April, with significant increases in sectors such as real estate (13.2%), wholesale and retail trade (11.1%), manufacturing (10.1%), transportation and storage (26.7%), and electricity, gas, steam, and air conditioning supply (7.7%).

Consumer loans to residents also saw a substantial increase of 25.6% in May, slightly up from 25.3% in April, primarily driven by credit card, motor vehicle, and salary-based general-purpose consumption loans.

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*Outstanding loans to non-residents include loans by UKB’s foreign currency deposit units (FCDUs) to non-residents.