Domestic liquidity or M3 reached P4.0 trillion in December, reflecting a slower growth of 8.3 percent year-on-year (y-o-y) from the previous month’s 12.0 percent. This brought the average M3 expansion to 13.2 percent for 2009. On a monthly basis, seasonally-adjusted M3 growth likewise decelerated to 0.1 percent during the month from 1.0 percent (revised) in November.
The slower growth of domestic liquidity during the month can be traced mainly to the deceleration in the growth of net foreign assets (NFA) at 26.5 percent from 32.5 percent in November. The growth in the BSP’s NFA position decreased to 20.3 percent in December relative to 21.3 percent a month ago. In addition, the growth in the NFA of depository corporations declined significantly to 69.6 percent from 137.6 percent in November as both the accumulation of foreign assets and reduction in foreign liabilities of other depository corporations slowed down.
Meanwhile, the contraction in the net domestic assets (NDA) eased slightly to 4.5 percent in December from 5.0 percent in the previous month. This was due largely to the improvement in credits extended to the private sector with the continued recovery in banks’ lending activity. The growth in credits extended to the private sector accelerated for the second consecutive month to 8.1 percent in December from 7.3 percent in November. In contrast, the growth in credits extended to the public sector decelerated further to 5.8 percent in December from 11.8 percent a month ago, due largely to the 3.1 percent contraction in credits extended to local governments and other public entities.
Despite the slowdown in the growth of domestic liquidity, credits extended to the private sector continued to increase, indicative of the growing confidence in the country’s future growth prospects. BSP Officer-In-Charge Nestor A. Espenilla, Jr. noted that the BSP will continue to utilize its policy tools prudently to ensure that ample liquidity is available to support non-inflationary economic growth.