Domestic Liquidity Continues to Increase in September

Preliminary data show that domestic liquidity (M3) grew by 12.6 percent year-on-year to P8.8 trillion in September, faster than the 11.9-percent (revised) expansion in the previous month. On a month-on-month seasonally-adjusted basis, M3 increased by 1.0 percent.

Demand for credit remains the main driver of money supply growth. Domestic claims grew by 16.1 percent in September from 15.1 percent (revised) in August, due largely to sustained growth in credit to the private sector. Growth in bank loans remains strong on account of lending to key production sectors such as real estate activties; electricity, gas, steam and airconditioning supply; wholesale and retail trade, repair of motor vehicles and motorcycles; manufacturing; and information and communication. Net claims on the central government picked up by 23.1 percent from 18.5 percent (revised) a month earlier as a result of continued withdrawals by the National Government of its deposits with the BSP.

Net foreign assets (NFA) in peso terms also increased by 13.5 percent in September from 8.8 percent in the previous month. Foreign exchange inflows coming from overseas Filipinos’ remittances and business process outsourcing receipts were the main contributors to the BSP’s NFA position. Meanwhile, the NFA of banks expanded due mainly to growth in banks’ foreign assets resulting from higher deposits with other banks and investments in marketable debt securities.

The continued expansion in M3 affirms the BSP’s assessment that liquidity conditions remain manageable and supportive of non-inflationary growth. Consistent with its mandate, the BSP will continue to closely monitor monetary conditions to ensure that overall monetary settings are in line with its price and financial stability objectives. (BSP)