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Domestic Liquidity Continues to Expand in July


Based on the Depository Corporations Survey (DCS), domestic liquidity or M3 grew by 4.1 percent year-on-year in July 2008, slightly lower than the 5.1 percent growth in June. On a month-on-month seasonally adjusted basis, M3 remained broadly stable as it declined marginally by only 0.02 percent in July. The data were generated from the Financial Reporting Package (FRP), the new system of bank reports that is consistent with the International Accounting Standards (IAS) and International Financial Reporting System (IFRS). 1 

The expansion in domestic liquidity continued to be driven by net foreign assets (NFA) which grew by 12.5 percent in July, albeit lower than the 17.7 percent growth posted in June. Net domestic assets (NDA) grew marginally by 0.4 percent in July—a slowdown from the previous month’s growth of 1.5 percent—as the growth of net domestic credits (at 5.9 percent) was more than offset by the decline in the Net Other Items account, which dropped by 22.3 percent. Net claims on the public sector fell by 6.6 percent in July despite the increase in lending to local governments and other public entities, as the increase in credits to the National Government (NG) was offset by the buildup in NG’s deposits with banks. By contrast, credits extended to the private sector increased by 12.8 percent in July from 11.8 percent in June, sustained partly by production loans to the agriculture and utilities sectors.

BSP Governor Amando M. Tetangco, Jr. observed that as a leading indicator of future economic activity, domestic liquidity provides insights on depository corporations’ financial intermediation activities in support of economic growth at the same time that it is also an important indicator of monetary conditions.


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

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