Demand for money increased further in September 2005 as domestic liquidity or M3 rose by 14.8 percent year-on-year to P2.241 trillion, based on data from the BSP’s Depository Corporations Survey (DCS).* However, this was a deceleration from the 15.0 percent year-on-year increase in domestic liquidity recorded in August 2005. On a monthly basis, M3 expanded by 0.4 percent in September, compared to the 1.4 percent growth in the previous month.
The sustained expansion in liquidity can be traced mainly to the increase in the net foreign assets of depository corporations which was fueled by strong capital inflows from overseas Filipino workers (OFW) remittances and portfolio investments. Deposit money banks’ (DMBs) net foreign assets increased year-on-year by almost 10 percent in September while the net international reserves of the BSP improved with the increase in its foreign assets coupled with a decline in its foreign liabilities.
The moderate growth in credits to both the public and private sectors also contributed to the expansion in domestic liquidity. Public sector credits grew by 4.9 percent in September given the strong demand for government securities issued by the National Government (NG) and the increase in loans availed by local government units (LGUs). Securities issued by the NG rose by 7.3 percent while credits to the LGU (mainly in the form of loans) increased by 8.6 percent. Meanwhile, private sector credits expanded moderately by 3.5 percent during the period.
The BSP will continue to monitor the level of domestic liquidity to ensure that it is consistent with the BSP’s price stability objective. The overall monetary policy stance will remain geared towards ensuring that all emerging risks to inflation and inflation expectations are addressed in a timely and appropriate manner.
* The DCS, which replaces the Monetary Survey (MS) as the basis for measuring domestic liquidity, features an expanded list of surveyed institutions that includes the BSP, commercial banks, thrift banks, rural banks, non-stock savings and loan associations and non-banks with quasi-banking functions. The previously used MS included only data from the BSP and the commercial banks and some rural banks in its survey.
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