Domestic liquidity (M3) grew by 16.3 percent year-on-year (y-o-y) in May to reach P5.3 trillion. This growth was faster relative to the 13.3 percent (revised) expansion recorded in the previous month. On a monthly basis, seasonally-adjusted M3 also expanded at a faster pace of 2.6 percent compared to the 2.0 percent (revised) month-on-month growth in April.
The growth in money supply was driven largely by the sustained expansion in net domestic assets (NDA). NDA increased by 28.2 percent y-o-y in May from 19.4 percent (revised) in the previous month due largely to the continued increase in credits to the private sector of 15.4 percent, reflecting the robust lending activity of commercial banks. Similarly, claims on the public sector grew by 8.3 percent in May after rising by 12.0 percent (revised) in April, largely a result of the increase in credits to the National Government (NG).
Meanwhile, the growth in net foreign assets (NFA) moderated to 0.9 percent in May from 2.9 percent (revised) in the previous month. The BSP’s NFA position increased by 4.4 percent on the back of steady foreign exchange inflows from overseas Filipinos’ remittances and BPO receipts. However, the NFA of banks declined further as banks’ foreign liabilities continued to increase due in part to higher placements and deposits made by foreign banks with other banks, while their foreign assets continued to decrease due to the decline in their loan receivables from and deposits with foreign banks.
The continued expansion in domestic liquidity during the month indicates sufficient liquidity to sustain the economy’s growth momentum. Going forward, the BSP will monitor monetary conditions closely to ensure that liquidity in the financial system remains supportive of economic activity while ensuring low and stable inflation.