Philippine liquidity sees slight expansion in May

The Philippine money supply posted a slight increase in May driven mainly by higher lending activity to the private sector during the month, data released by the Bangko Sentral ng Pilipinas (BSP) on Thursday showed.

Central bank data revealed that domestic liquidity or M3—the broadest measure of money in the financial system—expanded by 0.2% to P15.272 trillion from P15.244T in April, and by 6.9% from P14.286T in May 2021.

Lending to the private sector increased by 7.5% during the month, reflecting a faster growth than the 6.5% recorded in the previous month.

Net claims on the central government grew at a slower rate of 15.3% versus the 18.3% increase seen in April, on the back of the sustained borrowings by the national government.

Net foreign assets (NFA) in peso terms also grew at a slower rate of 3.4% from the 5.2% in April, similar to the movement seen in NFA of banks which was driven by higher investments in marketable debt securities.

“The slower expansion in the BSP’s NFA position reflected the decline in gross international reserves relative to the same period a year ago,” the BSP said in an accompanying statement.

“Domestic liquidity dynamics remain broadly in line with the BSP’s prevailing outlook for inflation and economic activity. Looking ahead, the BSP will continue to ensure that overall monetary conditions are conducive to maintaining price and financial stability,” it added.

The Monetary Board of the BSP last week hiked its key rates for the second straight month by 25 basis points — the overnight reverse repurchase facility to 2.5%, the overnight deposit facility to 2.0%, and the overnight lending facility to 3.0%.

Inflation has been on an uptrend so far this year, hitting a three-year high of 5.4% in May. It is expected to average 5.6% in the second half of the year. —LBG, GMA News