Domestic liquidity (M3) grew by 18.5 percent year-on-year in August to reach P7.1 trillion. This increase was faster than the (revised) 17.9-percent expansion recorded in July. On a month-on-month basis, seasonally-adjusted M3 increased by 0.8 percent, following the (revised) 2.3-percent growth in the previous month.
Money supply continued to increase due largely to the sustained demand for credit in the domestic economy. Domestic claims grew by 13.9 percent in August from 12.7 percent in July, reflecting in part the continued expansion in credits to the private sector. In particular, the bulk of bank loans during the month was channeled to key production sectors such as wholesale and retail trade, real estate, renting, and business services, utilities, financial intermediation, and manufacturing. At the same time, public sector credit increased by 4.7 percent in August following a contraction of 3.2 percent (revised) in the previous month as the deposits of the National Government (NG) with the BSP increased at a slower pace due largely to the withdrawal of funds by the NG for the redemption of maturing government securities.
Net foreign assets (NFA) in peso terms increased by 1.4 percent in August from 2.0 percent (revised) in July. The NFA of banks increased as banks’ foreign assets expanded at a faster pace relative to that of their foreign liabilities. Banks’ foreign assets expanded due mainly to the growth in their deposits with other banks and in their foreign loans and receivables, while banks’ foreign liabilities rose on account of higher deposits of foreign residents as well as placements and deposits made by foreign banks with their local branches. Meanwhile, the BSP’s NFA position declined during the month, reflecting the year-on-year decline in gross international reserves.
Domestic liquidity growth is expected to remain in line with the pace of expansion of the real sector, as previous monetary adjustments continue to work their way through the economy. Going forward, the BSP remains prepared to deploy all necessary measures to ensure that liquidity conditions continue to be in line with the BSP's objective of maintaining price and financial stability.