Domestic liquidity or M3 rose to P4.1 trillion in November, higher by 7.5 percent relative to a year earlier. The expansion was broadly similar to the growth of M3 in October at 7.7 percent. On a monthly basis, seasonally-adjusted M3 increased by 0.8 percent following a contraction of 1.0 percent (revised) in the previous month.
The increase in domestic liquidity can be traced mainly to the faster growth in net foreign assets (NFA) at 14.9 percent from 10.2 percent in October. The growth in the BSP’s NFA position accelerated to 29.1 percent from 20.3 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 56.0 percent from a contraction of 42.3 percent in the previous month, owing to an upsurge in their foreign liabilities coupled with a decrease in their foreign assets.
Net domestic assets (NDA) contracted by 1.2 percent during the month from a growth of 1.8 percent in October. This was due largely to the expansion of the net other items account (which includes revaluation and capital and reserve accounts as well as the SDA placements of trust entities), which pulled down domestic liquidity. Nevertheless, net domestic credits continued to rise, albeit at a slower pace of 8.0 percent from 9.0 percent in October, given the steady increase in credits extended to the private sector. Meanwhile, growth in credits extended to the public sector slowed down as the expansion in credits extended to the National Government moderated.
The growth in domestic liquidity reflects the current pace of demand expansion. The BSP will continue to closely monitor domestic financial conditions to ensure that the amount of liquidity in the banking system remains in line with the BSP’s price stability objective while at the same time supportive of the sustained momentum in economic activity.