Domestic liquidity or M3 growth accelerated in August, expanding by 9.8 percent year-on-year from 4.1 percent in July. This was based on the Depository Corporations Survey 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 was driven by the strong growth in net domestic assets (NDA) at 10.0 percent from 0.4 percent in July. This can be attributed primarily to the sustained expansion in credits extended to the private sector at 19.0 percent (higher than the 12.8 percent growth posted in the previous month), supported by the strong bank lending growth during the period. Meanwhile, credit extended to the public sector continued to decline, dropping by 1.9 percent as the build-up in the deposits of the National Government (NG) more than offset the increased lending to the NG and to local governments and other public entities. The expansion in the net foreign assets of depository corporations slowed down to 5.4 percent (from the 12.5 percent growth registered in July), due largely to the decline in the foreign assets of depository corporations (at 14.2 percent) as banks’ investments in foreign securities during the month were lower relative to the same period a year ago.
According to BSP Governor Amando M. Tetangco, Jr., the level of domestic liquidity is important in the assessment of the inflation outlook. He said that the BSP will continue to ensure that the liquidity conditions are consistent with the price stability objective, while at the same time being mindful of the growth requirements of the economy.
1 All numbers were worked back to show a consistent series.