Domestic liquidity or M3 rose by 13.2 percent year-on-year in July, based on preliminary data from the BSP’s Depository Corporations Survey (DCS). This was a slight deceleration from the 13.4 percent growth registered in June. On a month-on-month basis, M3 declined marginally by 0.4 percent.
The expansion in liquidity was fueled mainly by strong inflows of foreign exchange from overseas Filipino workers’ remittances and portfolio investments. These inflows allowed the BSP to build up its foreign assets and enabled both the BSP and deposit money banks (DMBs) to reduce their foreign liabilities. Meanwhile, the moderate expansion in credits to the public sector reflected the improving fiscal performance of the National Government (NG), with credits to the NG increasing moderately by 3 percent from the previous year’s level. Credits to local government units (LGUs) and other public entities, meanwhile, registered a significant 8.3 percent increase from the previous year’s level. Credits to the private sector registered a marginal uptick, consistent with the observed continued weakness in commercial bank lending.
On the liabilities side, the growth in liquidity was accompanied by significant increases in demand, savings and time deposits in the financial system.
Going forward, the Monetary Board will continue to closely monitor the evolving conditions for consumer prices and aggregate demand in order to determine the appropriate stance of monetary policy. Particular attention will be given to ensuring that the level of liquidity remains consistent with the BSP’s price stability objective.