Domestic liquidity or M3 continued to grow in July at a slightly faster pace of 12.9 percent year-on-year, relative to the 12.6 percent growth recorded in the previous month. On a monthly basis, seasonally-adjusted M3 growth accelerated to 1.1 percent from 0.3 percent in June.
The expansion in liquidity continued to be fueled by the rise in net foreign assets (NFA) at 21.7 percent in July from 17.6 in June. This can be traced to the sustained growth in the NFA position of the BSP and of the banks at 18.1 percent and 42.8 percent, respectively. NFA expanded as the BSP continued to build up its international reserves supported by steady remittances from abroad, while banks have repaid their foreign liabilities.
On the other hand, the growth in net domestic assets (NDA) slowed down to 1.5 percent year-on-year from 3.2 percent in the previous month, as the decline (at 48.6 percent) in net other items account, which includes revaluation and capital accounts and SDA placements of trust entities, partially offset the 15.0 percent expansion in net domestic credit. Growth in credit extended to the public sector accelerated to 23.1 percent, driven by a 28.4 percent increase in credit to the National Government (NG). In contrast, growth in credit extended to the private sector eased to 11.3 percent from 15.1 percent in the previous month, due mainly to the contraction in loans extended to manufacturing-the sector most affected by the weakening of global demand.
Governor Amando M. Tetangco, Jr. emphasized that the BSP will continue to monitor developments to ensure that monetary conditions are conducive to credit growth and investment activity to the extent that the inflation outlook will allow.