The engine powering the nation’s money supply in June slowed its pace as both corporate and individual borrowers took a step back. Growth in loans from universal and commercial banks eased to 9.8 percent year-on-year, down from a faster 12.1 percent sprint in May.
This moderation reflected a double wave of restraint: businesses grew more cautious in taking on new debt, and consumer enthusiasm for car loans and credit cards softened. While essential sectors like real estate, power generation, retail, and manufacturing continued to draw bank funding, weaker borrowing in construction, education, and service activities dragged down overall business credit expansion. Household borrowing followed a similar pattern, expanding at a cooler 17.8 percent compared to May’s 19.0 percent.
This deceleration in credit directly influenced the broader pool of money circulating through the economy. Domestic liquidity, known as M3—the total measure of cash, bank deposits, and readily convertible financial assets—grew by 10.6 percent to reach ₱20.5 trillion in June, stepping down from May’s 12.8 percent rise. Because bank lending serves as one of the primary mechanisms that injects fresh money into businesses and households, calmer borrowing directly throttled back the overall growth of system liquidity. Other engines helped sustain the money supply, such as the national government drawing on its central bank deposits and issuing debt securities to finance public spending, alongside gains in net foreign assets. However, the quieter pace of private sector loans clearly defined the broader liquidity environment.
For the Bangko Sentral ng Pilipinas (BSP), the interplay between lending and liquidity carries deep policy significance. Bank credit acts as the main pipeline through which central bank interest rate decisions move out into the real economy. By closely watching how easily credit flows to productive industries and families, alongside the total volume of money circulating, the BSP determines whether financial conditions are too tight or overly loose. Navigating this dynamic allows the central bank to keep the economic system properly oiled, ensuring there is enough liquidity to foster steady growth while protecting its core mandates of price and financial stability.
