Domestic liquidity or M3 growth decelerated to 12.4 percent year-on-year in August from the 13.2 percent growth registered in July, based on preliminary data from the BSP’s Depository Corporations Survey (DCS). On a month-on-month basis, however, M3 rose marginally by 0.6 percent from negative 0.4 percent in July.
The slowdown in the growth of domestic liquidity may be traced in part to the decline in credits to the public sector as a result of the improved fiscal performance—even as liquidity continued to grow, driven by strong inflows from overseas Filipino workers (OFW) remittances. In particular, net lending to the National Government declined by 7.8 percent from a 3.0 percent growth in July. In addition, growth in credits to the private sector slowed down to 0.4 percent from 0.5 percent in July. The OFW inflows allowed the BSP and the banks to build up their foreign assets and reduce their foreign liabilities.
The BSP will continue to closely monitor the level of domestic liquidity to ensure that it remains consistent with the BSP’s price stability objective, at the same time that it provides an appropriate environment for credit and growth.