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Domestic Liquidity Growth Broadly Steady in June

08.06.2010

Domestic liquidity or M3 grew by 10.3 percent year-on-year (y-o-y) in June, broadly similar to the previous month’s growth of 10.7 percent. On a monthly basis, seasonally-adjusted M3 growth decelerated to 0.3 percent in June from 2.2 percent (revised) in the previous month.

The sustained rise in net foreign assets (NFA) drove the expansion in domestic liquidity. NFA grew by 22.7 percent y-o-y in June from 19.0 percent in the previous month, due largely to the continued expansion in the BSP’s foreign assets at 22.5 percent.  In addition, the NFA of other depository corporations rose by 23.8 percent from 9.6 percent in May as banks continued to accumulate foreign assets.

Meanwhile, net domestic assets (NDA) contracted further by 0.9 percent in June as the steady expansion of the net other items account (which includes revaluation and capital and reserve accounts and SDA placements of trust entities) pulled down domestic liquidity. However, net domestic credits strengthened further as lending to both the public and private sectors grew steadily. Credits extended to the public sector increased by 9.4 percent in June, buoyed up by the 21.3 percent growth in credits extended to local governments and other public entities. Credits extended to the private sector similarly rose by 8.1 percent, consistent with the observed uptrend in bank lending activities.

Governor Amando M. Tetangco, Jr. noted that the steady expansion in domestic liquidity is in line with the strengthening internal momentum of the economy as domestic demand picks up and credit conditions improve. He added that the BSP will continue to closely monitor liquidity conditions with a view of promoting monetary stability and ensuring well-functioning financial markets.

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