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Domestic Liquidity Continues to Expand in July

08.28.2015

Preliminary data show that domestic liquidity (M3) grew by 8.5 percent year-on-year in July 2015 to reach P7.7 trillion. This was slightly slower than the 9.3-percent expansion (revised) recorded in June. On a month-on-month seasonally-adjusted basis, M3 increased by 0.7 percent.

Money supply continued to expand due largely to sustained demand for credit. Domestic claims grew by 11.0 percent in July from 10.8 percent in June. Credits to the private sector increased at a slightly slower pace relative to the previous month. The bulk of bank loans during the month was channeled to key production sectors such as real estate activities; electricity, gas, steam, and airconditioning supply; wholesale and retail trade, and repair of motor vehicles and motorcycles; financial and insurance activities; and manufacturing. Meanwhile, net public sector credit rose by 6.5 percent in July, faster than the 1.1-percent growth (revised) a month earlier.

Net foreign assets (NFA) in peso terms grew at a slower pace of 6.8 percent in July from 8.0 percent in the previous month. The BSP’s NFA position continued to expand during the month on the back of robust foreign exchange inflows coming mainly from overseas Filipinos’ remittances and business process outsourcing receipts. The NFA of banks likewise increased as banks’ foreign assets expanded at a faster pace relative to that of their foreign liabilities. Banks’ foreign assets increased due largely to the growth in their investments in marketable debt securities, while banks’ foreign liabilities grew mainly on account of higher deposits and placements made by foreign banks with other banks.

The continued expansion of domestic liquidity during the month indicates that money supply remains sufficient to support economic growth. Going forward, the BSP will continue to monitor monetary conditions closely to ensure that liquidity in the financial system remains consistent with the BSP’s price and financial stability objectives.

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