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Domestic Liquidity Growth Decelerates in November


Preliminary data show that domestic liquidity (M3) grew by 9.0 percent year-on-year in November to reach P7.3 trillion. M3 growth decelerated from the 15.4-percent expansion recorded in October. On a month-on-month seasonally-adjusted basis, M3 contracted by 1.2 percent.

Money supply continued to increase due largely to the sustained demand for credit. Domestic claims grew by 17.6 percent in November from 18.2 percent in the previous month, reflecting largely 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 real estate, renting, and business services, wholesale and retail trade, manufacturing, financial intermediation, utilities, and transportation, storage, and communication. At the same time, public sector credit rose by 14.6 percent in November from 10.9 percent in October, largely as a result of the increase in investments in government securities.

Meanwhile, net foreign assets (NFA) in peso terms grew at a slower pace of 2.0 percent in November from 3.4 percent in the previous month. The NFA of banks increased as banks’ foreign assets expanded at a faster pace relative to that of their foreign liabilities. Banks’ foreign assets continued to expand due mainly to the growth in their foreign loans and receivables, investments in marketable debt securities, and deposits with other banks, while banks’ foreign liabilities increased on account of higher placements made by foreign banks with their local branches. However, the BSP’s NFA position contracted relative to its level a year ago, reflecting the year-on-year decrease in gross international reserves.

At the same time, the deceleration in M3 growth during the month could be attributed in part to the increase in placements of trust entities in the BSP’s special deposit account (SDA) facility relative to a year ago. The slower M3 growth in November 2014 also reflects statistical base effects associated with the significant increase in domestic liquidity a year ago of  34.3 percent following the operational adjustments involving access of trust entities to the BSP SDA facility, which were completed in November 2013.

Going forward, the BSP remains prepared to take appropriate action as necessary to ensure that liquidity conditions continue to support the BSP’s objectives of maintaining price and financial stability.

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