Money supply accelerates as lending stays steady in February – BSP

Growth in domestic liquidity accelerated in February, while bank lending remained broadly steady, reflecting sustained credit activity despite tighter monetary conditions.

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed that money supply (M3) expanded by 10.3 percent year-on-year to P19.8 trillion in February, faster than the 8.6-percent growth recorded in January.

The BSP said the stronger expansion was driven by increased domestic credit. Claims on the domestic sector rose by 11.0 percent, supported by both private sector borrowing and higher government financing. Net claims on the national government alone grew by 12.4 percent, reflecting increased borrowings.

The February outturn marked a pickup from earlier trends. In previous months, liquidity growth had slowed — falling to as low as 7.6 percent in late 2025 — even as lending remained firm. The relatively softer M3 growth had factored into the central bank’s decision to cut policy rates in December and February.

In January, domestic liquidity stood at around P19.7 trillion, with growth supported by a 10.0-percent increase in domestic claims, albeit at a slower pace than in December.

Bank lending trends remained consistent with the liquidity data. Loans extended by universal and commercial banks grew by 9.5 percent year-on-year in February, slightly higher than 9.3 percent in January, indicating steady credit demand.

Outstanding loans to residents increased by 10.1 percent, while lending to non-residents continued to decline. Business lending — which accounts for the bulk of bank credit — expanded by 8.6 percent, with strong growth in key sectors such as energy, transport and real estate.

Consumer lending remained robust but showed signs of moderation, with growth easing to 20.8 percent from 21.3 percent, reflecting softer expansion in credit card and auto loans.

Money supply and bank lending maintain a reinforcing relationship. Higher M3 increases deposits and reserves in the banking system, easing funding constraints and enabling banks to expand credit.

When banks issue loans, they create deposits, which in turn raise the money supply and boost domestic liquidity. Lending also supports consumption — a major component of Philippine gross domestic product — as well as investment. Stronger economic activity supports income growth and savings, further reinforcing liquidity.