The rate of growth in the country’s money supply accelerated in May as local banks lent more cash to businesses and consumers to boost economic activity.
Data from the Bangko Sentral ng Pilipinas (BSP) Friday showed that domestic liquidity, or M3, grew by 16.3 percent last month—faster than the year-on-year expansion reported the month before.
The loans granted by universal and commercial banks, net of placements with the BSP, also grew by 13.1 percent in the same period—up from the 12 percent recorded in April.
“The continued expansion [in M3] during the month indicates sufficient liquidity to sustain the economy’s growth momentum,” central bank Governor Amando M. Tetangco Jr. said in a statement.
The growth in the amount of money circulating in the country’s financial system failed to bump up inflation in May, pointing to the economy’s ability to absorb the extra cash and make it work productively. Inflation in May stood at 2.8 percent, just below the BSP’s target range of 3 to 5 percent for the year.
Net domestic assets, which measures loans secured from banks, rose by 28.2 percent year-on-year, up from the 19.4 percent posted the previous month. Loans to the private sector went up by 15.4 percent, while credit extended to the public sector rose by 8.3 percent—slower than the 12 percent seen in April.
Net foreign assets—the value of assets owned by Filipinos abroad against the value of assets in the country owned by foreigners—grew by just 0.9 percent from 2.9 percent in April.
The figure was dragged down by foreign banks’ placements in local financial institutions.
The BSP said the growth in bank lending was driven by demand from the real estate, wholesale and retail, financial intermediation, and manufacturing sectors.
Loans to agriculture, hunting and forestry fell by 6.5 percent. Loans for fishing activities also went down by 3.6 percent.
“The continued brisk growth in bank lending suggests adequate funding for domestic economic activity in the months ahead,” the central bank said.
Meanwhile, the amount of local banks’ dollar-denominated loans grew by 11 percent in the first quarter of the year amid strong demand from businesses.
Outstanding loans of foreign currency deposit units (FCDU) of local banks stood at $9.7 billion—up from the $8.7 billion seen at the end of last year, BSP data showed.
The BSP said the “acceleration in loan disbursements” by FCDUs was a result of the low interest rates, “a stable exchange rate, and positive business and consumer sentiment due to strong macroeconomic fundamentals.”
Medium to long-term loans represented 61.1 percent of the total, while short-term loans, or those maturing in less than a year, made up the rest.