Preliminary data on domestic liquidity (M3) indicate that the demand for money in November increased by 6.25 percent year-on-year from 6.2 percent in October 2004, to reach P1.79 trillion as of end-November 2004. The expansion in net foreign assets and the growth in the levels of domestic credits to both the public and private sectors pushed M3 higher. Similarly, seasonally adjusted M3 rose month-on-month by 1.59 percent in November 2004, overshadowing the 0.8 percent increase in October 2004.
Both the components of M3, the net foreign assets and net domestic assets of the monetary system—comprising of the monetary authorities and the banking system— recorded jumps at an annual rate of 11.1 percent and 6.8 percent, respectively, in November. The decline in the foreign liabilities of the BSP led to the increase in the net foreign assets (NFA) of the monetary system. Meanwhile, the growth of credits to the public sector, mainly the national government as well as local governments and other government entities sustained the increase in net domestic assets. Private sector credits rose by 5.4 percent, up from the 4.8 percent increase recorded in the previous month.
The sustained growth in M3 supported the improvements in real sector activity as reflected by the 6.3 percent growth in the country’s GDP during the third quarter of 2004. In the near term, the BSP will continue to monitor the evolving macroeconomic conditions to ensure that the expansion of domestic liquidity keeps pace with the requirements of the economy yet promoting the price stability objective of the monetary authorities.