Money Supply Growth Slowed in May 2022: Here's Why

Bank Indonesia (BI) reported that broad money supply (M2) experienced renewed growth in May 2022. However, this growth slowed compared to the previous month.

According to BI data, M2 in May 2022 reached Rp7,854.8 trillion, representing a 12.1% year-on-year (yoy) increase. This growth slowed from April 2022's 13.6% yoy growth.

This development was primarily driven by an 18.4% yoy growth in narrow money (M1), lower than the previous month's 20.8% yoy growth. Quasi money also grew by 4.6% yoy, lower than the previous month's 5% yoy growth.

Furthermore, the securities component (excluding shares) showed a 45.5% yoy growth, lower than the previous month's 59.3% yoy growth. This is related to the slowdown in bank acceptance liabilities to the domestic private sector, certificates of deposit, and bonds with maturities of less than one year.

Based on the influencing factors, the growth of M2 in May 2022 was mainly influenced by the development of government financial expansion and credit disbursement, which was lower than the previous month.

In May 2022, government financial expansion slowed, reflected in the slower growth of the net monetary claims on the central government, from 22.3% yoy in April 2022 to 3.8% yoy in May 2022.

Meanwhile, credit disbursement in May 2022 grew by 8.7% yoy. This growth was not as strong as the previous month's 8.9% yoy growth, in line with the slowdown in working capital and consumption credit disbursement.

On the other hand, the contraction of net foreign assets in May 2022 improved compared to the previous month, from a 4.4% yoy contraction in April 2022 to a 2.9% yoy contraction in May, in line with developments in foreign exchange reserves.