Domestic Liquidity Growth Eases in January

Preliminary data from the Bangko Sentral ng Pilipinas (BSP) show that domestic liquidity (M3) growth grew by 7.6% year-on-year to about PhP11.4 trillion in January 2019. This was slower than the 9.2% expansion in December 2018. On a month-on-month seasonally-adjusted basis, M3 increased by 0.6%.

Demand for credit eased but remained the principal driver of money supply growth. Domestic claims grew by 12.2% in January from 14.6% in the previous month due mainly to the sustained growth in credit to the private sector. Loans for production activities continued to be driven by lending to key sectors such as wholesale and retail trade, repair of motor vehicles and motorcycles; financial and insurance activities; manufacturing; real estate activities; electricity, gas, steam and airconditioning supply; and construction. Meanwhile, the growth of loans for household consumption slowed down in January as the deceleration in credit card loans and motor vehicle loans alongside a contraction in salary-based general purpose consumption loans offset the expansion in other types of household loans during the month. Growth in net claims on the central government likewise slowed to 4.7% in January from 16.4% in the previous month.

Meanwhile, net foreign assets (NFA) in peso terms contracted by 0.9% year-on-year in January after expanding by 1.3% in the previous month. The NFA of banks contracted even as banks’ foreign assets continued to increase as a result of higher loans and investments in marketable debt securities. In contrast, the BSP’s NFA position continued to expand in January, reflecting the increase in gross international reserves.

The BSP will continue to closely monitor domestic liquidity dynamics to ensure that overall monetary conditions remain in line with maintaining price and financial stability.

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