Demand for money increased further in September as domestic liquidity or M3 growth based on data from the BSP’s Depository Corporations Survey (DCS) accelerated to 14.5 percent year-on-year from 12.4 percent in August. On a month-on-month basis, M3 rose by 2.4 percent from 0.2 percent in August.
The expansion in liquidity can be traced largely to the increase in the net foreign assets of depository corporations on the back of strong foreign exchange inflows from overseas Filipino workers (OFW) remittances and portfolio investments. Deposit money banks’ (DMBs) net foreign assets increased year-on-year by nearly tenfold in September, while the BSP’s net foreign assets continued to improve albeit at a slower pace.
The growth of domestic credits to the public sector also contributed to the expansion in domestic liquidity. Net public sector credits grew by 4.2 percent in September as credits to the National Government and local government units posted positive growth during the period. On the other hand, private sector credits declined by 1.3 percent as the overall pace of bank lending activity remained weak.
The BSP remains committed to achieving its inflation objective and will thus keep a close eye on the evolving path of monetary and price conditions.