Domestic liquidity or M3 reached P4.0 trillion in October, reflecting a slower growth of 7.7 percent year-on-year from 10.5 percent in September. On a monthly basis, seasonally-adjusted M3 contracted by 0.9 percent following an expansion of 2.1 percent (revised) in the previous month.
The growth in domestic liquidity during the month can be traced mainly to the steady increase of net foreign assets (NFA), albeit at a slower pace of 10.2 percent from 12.8 percent in September. The growth in the BSP’s NFA position accelerated to 20.3 percent from 19.2 percent, due in part to sustained foreign exchange inflows from overseas remittances, portfolio investments, and export receipts. However, the NFA of banks declined further by 42.3 percent from a contraction of 22.6 percent in the previous month, owing to the upsurge in their foreign liabilities coupled with a decrease in their foreign assets.
Similarly, the expansion in net domestic assets (NDA) decelerated to 1.8 percent in October relative to 5.1 percent in September. Credits extended to the private sector rose by 10.1 percent, in line with the continued uptrend in bank lending activities and consistent with the strong pick-up in domestic demand. Meanwhile, growth in credits extended to the public sector slowed down to 6.7 percent as the expansion in credits extended to local government units and other public entities moderated to 7.9 percent from 20.5 percent in September.
Governor Amando M. Tetangco, Jr. noted that despite the slowdown in M3 growth, liquidity remains adequate to support the funding requirements of the country’s economic expansion. He added that the BSP will continue to monitor domestic liquidity conditions with a view to ensuring the stability of prices and the financial system.