GROWTH in money supply picked up in May, ensuring that the Philippines had enough cash in circulation to keep economic engines running smoothly, the Bangko Sentral ng Pilipinas (BSP) said Tuesday.
In a statement, the BSP said domestic liquidity or M3 grew by 9.3 percent year-on-year in May 2015 to reach P7.6 trillion. This was slightly faster than the 9.0-percent expansion recorded in April. On a month-on-month seasonally-adjusted basis, M3 increased by 0.7 percent.
“Money supply continued to increase due largely to sustained demand for credit,” the BSP said, adding that the expansion in domestic liquidity during the month meant that liquidity remained sufficient to sustain the economy’s growth trajectory.
“Going forward, the BSP will closely monitor monetary conditions to ensure that liquidity in the financial system remains in line with the BSP’s price and financial stability objectives,” the BSP said.
The BSP’s main goal is to protect consumers’ purchasing power by keeping prices stable. As such, the BSP closely tracks the amount of money in the economy because excesses can lead to higher prices, while deficiencies can stunt growth.
Faster growth in the country’s money supply came as bank lending expanded at a slightly slower pace in the same month.
Outstanding loans of commercial banks, net of reverse repurchase (RRP) placements with the BSP, grew at a slightly slower pace of 14.5 percent in May from 15.4 percent in the previous month. Likewise, the growth of bank lending inclusive of RRPs slowed down to 14.4 percent from the 14.9 percent growth posted in the previous month.
Universal and commercial banks make up about 90 percent of the local banking sector.