MONEY SUPPLY growth eased in May due to lower demand for credit, the Bangko Sentral ng Pilipinas (BSP) reported Friday.

Domestic liquidity or M3, which is the broadest measure of money in an economy, grew 6.4% year-on-year to about P11.7 trillion in May, slower than the seven percent expansion recorded in April, latest BSP data showed.

Money supply increased 1.6% month-on-month.

“Demand for credit eased slightly but remained the principal driver of money supply growth,” the central bank said in a statement.

Net claims on the central government contracted by 6.4% in May, a reversal from the upward-revised 0.6% expansion tallied the previous month, party due to the increase in deposits by the national government with the BSP.

Meanwhile, domestic claims grew 6.8%, decelerating from December’s downward-revised 8.9% pace, but still supported by sustained growth in loan to the private sector.

The central bank said loans for production activities continued to be driven by lending to key sectors such as real estate activities, financial and insurance activities, manufacturing, electricity, gas, steam and airconditioning supply, construction, as well as wholesale and retail trade, repair of motor vehicles and motorcycles.

“Loans for household consumption likewise moderated due to the decline in salary-based general purpose consumption loans,” the BSP added.

On the other hand, net foreign assets (NFA) expressed in peso terms expanded by 4.4% in May from upward-revised 3.9% in April, propelled by foreign exchange inflows coming mainly from business process outsourcing receipts as well as remittances from overseas Filipinos.

By contrast, the NFA of banks continued to decline as their foreign obligations increased due to higher placements and deposits made by offshore banks with their local branches and other lenders.

Meanwhile, bank lending growth also decelerated in May due to slower growth in loans for the corporate and household sectors.

Outstanding loans grew 11.9% in May, slower than the 12.7% pace recorded in April. Inclusive of reverse repurchase agreements, bank lending growth also eased to 10.6% in May from 12.8% the previous month.

Production loans accounted for the bulk of the credit at 88.2% even as growth eased to 11.5% in May from the 12.4% the previous month.

Construction loans continued to log the highest increase at 43%, followed by financial and insurance activities at 21.2%; real estate activities at 13.6%; electricity, gas, steam and airconditioning supply at 13.1%; manufacturing at 11.6%; and wholesale and retail trade, repair of motor vehicles and motorcycles at 9.3%, BSP data showed

Bank lending to other sectors also increased during the month except those in other community, social and personal activities which dropped 55%, and professional, scientific and technical activities, which declined 22.5%.

Loans for household consumption grew 14.6% in May, slightly lower than the 15% booked in April, as decline in salary-based general purpose consumption loans during the month slightly offset growth in credit card loans and other types of household loans.

“Going forward, the BSP will continue to ensure that the expansion in domestic credit and liquidity remains consistent with promoting non-inflationary and sustainable growth,” the central bank said. — Karl Angelo N. Vidal