Liquidity grows 6.6% in August, bank lending up 11.2%

By Francis Allan L. Angelo

Domestic liquidity, or M3, rose 6.6% year over year to PHP 18.6 trillion in August, based on preliminary data.

The August M3 expansion was faster than July’s 6.2% increase, indicating firmer money-supply growth.

Seasonally adjusted, M3 increased 0.5% month over month in August.

M3 is a broad money measure that includes currency in circulation, bank deposits, and other liquid financial assets.

For the public, faster money-supply growth can support jobs and business activity but also bears watching because too-rapid liquidity can add pressure to inflation and future interest-rate decisions.

Claims on the domestic sector—liabilities of private and government entities to depository corporations—grew 9.8% in August from 10.5% in July, reflecting still-solid credit demand even as the pace moderated.

Claims on the private sector rose 11.1% from 11.0% a month earlier, supported by continued bank lending to nonfinancial corporations and households.

Net claims on the central government increased 6.1% from 7.1% in July amid higher government borrowings.

Net foreign assets in peso terms climbed 4.8% year over year after a 0.6% decline in July, with the Bangko Sentral ng Pilipinas’ NFA up 0.7% and banks’ NFA higher as foreign currency–denominated bills payable fell.

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

For consumers and small firms, these trends signal that credit remains available for home purchases, car loans, and working capital, although borrowing costs will still hinge on the BSP’s inflation outlook.

Outstanding loans of universal and commercial banks expanded 11.2% year over year in August from 11.8% in July, while seasonally adjusted credit rose 0.4% month over month.

Loans to residents increased 11.6% from 12.4% in July, and loans to nonresidents contracted 5.9% after an 8.1% decline previously.

Business loans grew 9.9% from 10.8% in July, led by lending to real estate activities (11.0%); electricity, gas, steam, and air-conditioning supply (28.1%); wholesale and retail trade, repair of motor vehicles and motorcycles (8.1%); financial and insurance activities (6.9%); and information and communication (7.5%).

Consumer loans to residents—which include credit cards, auto loans, and general-purpose salary loans—rose 23.9% from 23.6% in July.

For households, robust consumer lending can ease access to credit but also warrants prudent budgeting because rising card balances and salary loans are typically tied to higher interest costs.

The BSP said it will continue to align domestic liquidity and lending conditions with its inflation and financial stability mandates, noting that bank credit is a key transmission channel of monetary policy.

For rate-sensitive borrowers such as mortgage holders and entrepreneurs, the central bank’s next moves on policy will influence monthly payments, refinancing decisions, and expansion plans over the coming quarters.