Domestic Liquidity Growth Remains Broadly Steady in July

Preliminary data show that domestic liquidity (M3) continue to expand, growing by 14.5 percent year-on-year to about ₱13.6 trillion in July. This was broadly steady from the 14.9 percent growth in June, according to the Bangko Sentral ng Pilipinas (BSP). On a month-on-month seasonally-adjusted basis, M3 increased by 0.5 percent.

Demand for credit remained the principal driver of money supply growth, as domestic claims rose by 12.3 percent year-on-year in July from 13.3 percent in June. Claims on the private sector, driven mainly by bank lending to non-financial private corporations and households, grew at a weaker pace due to constrained economic activity and soft corporate sector performance. Loans for production activities continued to be driven by lending to key sectors such as real estate activities; information and communication; financial and insurance activities; electricity, gas, steam and air conditioning supply; human health and social work activities; and transportation and storage. Meanwhile, growth in loans to households eased due to the further slowdown in credit card, motor vehicle, and salary-based general consumption loans during the month. Albeit slower, net borrowings by the central government expanded by 51.7 percent in July from 53.2 percent (revised) in the previous month, reflecting in part the government’s funding requirement for its initiatives against the COVID-19 health crisis.

Meanwhile, net foreign assets (NFA) in peso terms expanded by 23.0 percent year-on-year in July, faster than the 15.7 percent (revised) growth in June. The continued expansion in the BSP’s NFA position reflected the increase in gross international reserves. Meanwhile, growth in the NFA of banks accelerated, as banks’ foreign assets rose on account of higher deposits with other banks as well as interbank loans.




Going forward, the BSP will remain vigilant over domestic liquidity and credit dynamics amid the gradual reopening of the economy. The BSP remains prepared to deploy all necessary measures to ensure that liquidity and credit remain sufficient to support domestic demand amid the COVID-19 pandemic.