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Domestic Liquidity Decelerates in April, Expands Anew in May

07.31.2008

Based on the Depository Corporations Survey (DCS), the growth of domestic liquidity or M3 slowed down to 0.8 percent in April from 2.1 percent (revised) in March but accelerated to 3.7 percent in May. The data were generated from the new system of bank reports, the Financial Reporting Package (FRP), which is consistent with the International Accounting Standards (IAS) and International Financial Reporting System (IFRS).1 

The expansion in M3 in May can be traced to the sustained rise in net foreign assets (NFA) coupled with a slower decline in net domestic assets (NDA).  NFA posted double-digit growths in April and May, at 16.5 percent and 20.1 percent, respectively. Meanwhile, NDA contracted in April as well as in May. The Net Other Items account (which includes SDAs and RRPs) remained in negative balance.  Credit extended to the private sector tracked the trend of domestic liquidity, picking up in May at 8.6 percent, after slowing down in April. Credit extended to the public sector continued to slow down to post a 4.9 percent expansion in May from an 8.7 percent growth in April. This resulted from the deceleration in the growth of credit extended to the National Government (NG) as well as to local governments and other public entities.

The BSP will continue to closely monitor developments in domestic liquidity because it is one of the important indicators of monetary conditions.

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1 All the numbers were worked back to show a consistent series.

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