Domestic liquidity (M3) grew by 8.6 percent year-on-year (y-o-y) in October, faster than the 7.5 percent recorded in the previous month, to reach P4.7 trillion. On a monthly basis, seasonally-adjusted M3 expanded by 0.7 percent, broadly steady compared to the 0.8 percent month-on-month growth in September.
The growth of money supply was driven by the expansion of net domestic assets (NDA), which grew by 13.3 percent y-o-y in October from 12.4 percent in the previous month. The increase in the NDA, in turn, was due to the sustained increase in net domestic credits along with the slower rise in the net other items account (which includes, among other things, revaluation and capital and reserve accounts as well as placements of authorized counterparties in the BSP SDA facility). Net domestic credits grew by 8.9 percent, buoyed by the expansion in the claims on the private sector, consistent with robust lending activity by commercial banks. Meanwhile, claims on the public sector contracted by 7.6 percent from a growth of 6.2 percent in the previous month due to the rise in National Government deposits, reflecting proceeds from the issuance of 25-year Retail Treasury Bonds in October.
Net foreign assets (NFA) also continued to grow during the month, rising by 2.8 percent y-o-y from 1.3 percent in September. The BSP’s NFA position increased by 4.4 percent, supported by steady foreign exchange inflows from overseas remittances and portfolio investments. Meanwhile, the NFA of banks declined further as banks’ foreign liabilities continued to increase due in part to higher placements and deposits made by foreign banks with their local branches while their foreign assets contracted due to the decline in loan receivables from foreign banks.
The steady rise in M3 indicates that liquidity in the financial system can amply fund the economy’s growth requirements amid ongoing strains in the global economy. The BSP will continue to ensure that monetary conditions remain supportive of domestic economic activity while keeping inflationary pressures at bay.