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Domestic Liquidity Sustains Strong Growth in December 2008


Demand for money remained strong in December as domestic liquidity or M3 grew by 15.6 percent year-on-year, higher than the 14.6 percent year-on-year increase recorded a month ago. This brings the average M3 growth for 2008 to 8 percent. On a monthly basis, seasonally-adjusted M3 expanded by 2.6 percent in December from the 2.0 percent (revised) growth posted in the previous month.

BSP Governor Amando M. Tetangco, Jr. said that the sustained double-digit expansion in domestic liquidity, which started in September 2008, was due to the strong growth in both net domestic assets (NDA) and net foreign assets (NFA).  NDA expanded by 13.1 percent, due mainly to credit extended to the private sector, which increased by 16.8 percent. Credit extended to the public sector also grew by 16.7 percent on the back of a 16.2 percent growth in lending to the National Government.  The growth of credit granted to local government units and other public entities also accelerated at 18.2 percent. Meanwhile, NFA grew by 16.4 percent from 11.8 percent in November, due mainly to the continued growth in the BSP’s NFA as the BSP’s foreign assets sustained robust growth of 28.0 percent from 28.3 percent a month ago. Banks’ NFA continued to contract, although at a much slower pace, by 16.8 percent in December from 41.9 percent in November, as their investments in foreign securities plummeted. 

The continued growth of domestic liquidity indicates that there are funds available in the system which could be tapped for investment and other productive activities.

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