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Domestic Liquidity Expands Further in May

06.30.2016

Preliminary data show that domestic liquidity (M3) grew by 13.5 percent year-on-year in May to reach almost P8.7 trillion. This was faster than the 12.8-percent (revised) expansion recorded in April. On a month-on-month seasonally-adjusted basis, M3 increased by 1.4 percent.

Money supply continued to expand due largely to sustained demand for credit. Domestic claims grew by 18.7 percent in May from 18.4 percent in April as credits to the private sector increased at a faster pace relative to the previous month. The bulk of bank loans during the month was channeled to key production sectors such as real estate activities; wholesale and retail trade, and repair of motor vehicles and motorcycles; financial and insurance activities; and information and communication. Net claims on the central government also rose by 35.0 percent in May, slower than the 41.9-percent (revised) growth a month earlier.

Net foreign assets (NFA) in peso terms likewise grew by 9.0 percent in May from 8.0 percent in the previous month. The BSP’s NFA position continued to expand during the month on the back of robust foreign exchange inflows coming mainly from overseas Filipinos’ remittances, business process outsourcing receipts, and portfolio investments. Meanwhile, the NFA of banks increased as their foreign assets expanded at a faster pace relative to that of their foreign liabilities. Banks’ foreign assets increased due largely to the growth in their investments in marketable debt securities, while banks’ foreign liabilities grew mainly on account of higher deposits made by foreign banks.

The sustained expansion of M3 during the month indicates that money supply remains sufficient to support economic growth. Going forward, the BSP will continue to monitor liquidity and credit dynamics to ensure that monetary conditions remain consistent with maintaining price and financial stability.

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