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Domestic Liquidity Continues to Expand in December

01.29.2016

Preliminary data show that domestic liquidity (M3) grew by 8.3 percent year-on-year in December 2015 to reach P8.3 trillion. This was slower than the 9.4-percent (revised) expansion recorded in November. On a month-on-month seasonally-adjusted basis, M3 decreased by 0.2 percent.

Money supply continued to expand due largely to sustained demand for credit. Domestic claims grew by 10.8 percent in December from 11.8 percent (revised) in November. Credits to the private sector increased at a 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 information and communication. Meanwhile, net public sector credit rose by 12.0 percent in December, faster than the 10.5-percent growth a month earlier.

Net foreign assets (NFA) in peso terms grew by 6.4 percent in December from   8.9 percent (revised) 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. Meanwhile, the NFA of banks declined during the month, driven largely by the increase in banks’ foreign liabilities due to higher deposits made by foreign banks.

The continued expansion of domestic liquidity during the month indicates that money supply remains adequate to support economic growth. Going forward, the BSP will continue to monitor monetary conditions to ensure that liquidity dynamics remain in line with maintaining price and financial stability.

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