Domestic liquidity (M3) increased at a slower pace of 7.9 percent year-on-year in May to reach P4.6 trillion. This follows a 9.1 percent growth recorded a month earlier. On a monthly basis, the growth of the seasonally-adjusted M3 was 0.03 percent after growing by 2.2 percent in the previous month.
Money supply growth continued to be driven by the sustained expansion of net foreign assets (NFA) at 9.6 percent in May. The BSP’s NFA position grew by 11.6 percent, supported by steady foreign exchange inflows from overseas remittances and portfolio investments. On the other hand, the NFA of banks continued to decrease in May as the rise in their foreign liabilities outpaced the increase in their foreign assets. Banks’ foreign liabilities increased further due in part to higher placements and deposits made by foreign banks with their local branches.
Meanwhile, the growth of net domestic assets (NDA) decelerated to 2.9 percent from 4.6 percent in April due largely to the faster increase in the net other items account owing to higher placements of eligible counterparties in the BSP SDA facility. The slower growth in lending to the private sector also moderated liquidity growth.
The BSP is of the view that overall liquidity conditions remain supportive of the country’s growth requirements despite the recent slowdown in domestic liquidity growth. Going forward, the BSP will continue to monitor closely monetary conditions to ensure that monetary conditions remain supportive of economic activity to the extent that inflation outlook will allow.