PHL money supply up 13.5 percent in May

Domestic liquidity continued to grow in May owing to "sustained demand for credit," the Bangko Sentral ng Pilipinas (BSP) said on Thursday.

"Preliminary data show that domestic liquidity (M3) grew by 13.5 percent year-on-year in May to reach almost P8.7 trillion," the central bank said.

This compares with the upward-revised 12.8-percent expansion in April.

"Money supply continued to expand due largely to sustained demand for credit," the BSP said.

According to central bank data, domestic claims grew by 18.7 percent in May from 18.4 percent in April – driven by the rise in credits to the private sector.

The bulk of bank loans during the month went to key production sectors such as real estate; wholesale and retail trade; repair of motor vehicles and motorcycles; financial and insurance; and information and communication.

Net claims on the central government grew at a slower pace of 35.0 percent in May from 41.9 percent a month earlier.

Net foreign assets (NFA) in peso terms rose by 9.0 percent in May from 8.0 percent in April.

"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," it said.

"The sustained expansion of M3 during the month indicates that money supply remains sufficient to support economic growth," the central bank added.

Sought for comment, Cid Terosa, Vice Dean of the Economics Program at the University of Asia and the Pacific (UA&P), was not surprised by the amount of money in the financial system.

"... Because of rapid business and economic transactions due to events such as the opening of classes and last minute spending on government programs," he said.

The level of was also reinforced by the latest auction of term deposit facility (TDF), which was oversubscribed for the fourth consecutive week on Wednesday.

Data released by the BSP showed the P10-billion, seven-day TDF reaped P61.383 billion in bids and was accepted by the central bank at 2.5 percent. The bids for the 28-day TDF totaled P91.955 billion, compared with P20 billion on offer, and were accepted also at a yield rate of 2.5 percent.

The facility is the BSP's main tool to mop up excess liquidity in the financial system. Banks and trust entities bid for the interest rate which the central bank will pay for them to store their excess funds.

Terosa noted domestic liquidity may not grow as fast in the coming months.

"I don't expect it to be as vigorous, because BSP is aggressively mopping up liquidity," he said. – VDS, GMA News