Money supply growth slows in June

Published August 7, 2020, 10:00 PM

by Lee C. Chipongian

Domestic liquidity up 14.9%

Domestic liquidity increased by 14.9 percent year-on-year to P13.6 billion in June but it was a slower growth compared to May’s 16.7 percent, the Bangko Sentral ng Pilipinas (BSP) reported Friday.

 Money supply or M3, on a month-on-month seasonally-adjusted basis, dropped 1.1 percent. 

 According to the BSP, “demand for credit remained the principal driver of money supply growth, with domestic claims rising by 13.3 percent year-on-year in June from 16.2 percent in May.”

 The government has a higher funding requirement due to its pandemic response program and in June, the net borrowings were up by 53 percent compared to 59.7 percent in May.

 June is still a lockdown period despite that it is less stricter, or downgraded from modified enhanced community quarantine in May to a general community quarantine status. As such, claims on the private sector were also slower in its growth with “constrained economic activity and weak business prospects.”

 These claims are driven mainly by bank lending to non-financial corporations and households, said the BSP, such as loans to real estate activities, financial and insurance activities, information and

communication, electricity, gas, steam and air conditioning supply, and transportation and storage.

 The BSP said the net foreign assets (NFA), in the meantime, grew by 15.3 percent year-on-year from 12.1 percent in May. “The BSP’s NFA position continued to expand, reflecting the increase in gross international reserves.”

 The NFA of banks also increased, said the BSP, as “banks’ foreign assets rose on account of higher interbank loans, deposits with other banks, and investments in marketable debt securities.”