Domestic Liquidity Growth Eases in September

Manila—(PHStocks)—Bangko Sentral ng Pilipinas (BSP)—Domestic liquidity (M3) grew by 16.2 percent year-on-year in September to reach PhP7.2 trillion, slower than the (revised) 18.3-percent expansion recorded in August. On a month-on-month basis, seasonally-adjusted M3 increased by 0.3 percent, following the (revised)  0.7-percent growth in the previous month.

Money supply continued to increase due largely to the sustained demand for credit in the domestic economy. Domestic claims grew by 16.0 percent in September from 14.6 percent (revised) in August , reflecting in part the continued expansion in credits to the private sector. In particular, the bulk of bank loans during the month was channeled to key production sectors such as wholesale and retail trade, utilities, real estate, renting, and business services, manufacturing, and financial intermediation. At the same time, public sector credit grew by 12.9 percent in September from 5.5 percent (revised) in August as the deposits of the National Government (NG) with the BSP increased at a slower pace due largely to the withdrawal of funds by the NG for the redemption of maturing government securities.

Net foreign assets (NFA) in peso terms grew by 3.9 percent in September from 1.4 percent in the previous month. The NFA of banks increased as banks’ foreign assets continued to expand due mainly to the growth in their foreign loans and receivables and in their deposits with other banks. Meanwhile, banks’ foreign liabilities declined slightly on account of lower deposits made by foreign banks with their local branches. The BSP’s NFA position contracted during the month, reflecting the year-on-year decrease in gross international reserves.

Domestic liquidity growth is expected to further moderate to levels consistent with domestic demand, as previous monetary adjustments continue to work their way through the economy. Going forward, the BSP remains prepared to take appropriate action as necessary to ensure that liquidity conditions continue to be consistent with the BSP’s objective of maintaining price and financial stability.

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