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Domestic Liquidity Continues to Expand in August

09.30.2016

Preliminary data show that domestic liquidity (M3) grew by 11.8 percent year-on-year to P8.7 trillion in August, slower than the 13.1-percent increase in the previous month. On a month-on-month seasonally-adjusted basis, M3 decreased by 0.2 percent.

Demand for credit continued to fuel money supply growth. Domestic claims grew by 14.9 percent in August from 16.5 percent in July on the back of a sustained increase in credits to the private sector. Growth in bank loans continued to be driven by key production sectors such as real estate activities; electricity, gas, steam and airconditioning supply; and wholesale and retail trade, repair of motor vehicles and motorcycles. Net claims on the central government also rose by 18.2 percent during the month from 25.4 percent a month earlier as a result of withdrawals by the National Government of its deposits with the BSP.

Meanwhile, net foreign assets (NFA) in peso terms grew by 8.8 percent in August from 12.5 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, business process outsourcing receipts, and portfolio investments. The NFA of banks also expanded, driven largely by the increase in banks’ foreign assets resulting from deposits with other banks and investments in marketable debt securities.

The data suggests that the expansion in M3 remains manageable and consistent with ensuring non-inflationary growth. Moving forward, the BSP will continue to monitor monetary conditions closely to ensure that liquidity in the system stays in line with price and financial stability.

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