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Domestic Liquidity Expands Further in November

12.29.2016

Preliminary data show that domestic liquidity (M3) grew by 12.7 percent year-on-year to P9.1 trillion in November compared to the 12.8-percent expansion in the previous month. On a month-on-month seasonally-adjusted basis, M3 increased by 0.6 percent.

Demand for credit remains the principal driver of money supply growth. Domestic claims grew by 17.0 percent in November from 16.7 percent in October due largely to sustained growth in credit to the private sector. Growth in bank loans remains strong on account of lending to key production sectors such as real estate activities; electricity, gas, steam and airconditioning supply; wholesale and retail trade, repair of motor vehicles and motorcycles; manufacturing; information and communication; and financial and insurance activities. Meanwhile, net claims on the central government expanded by 24.9 percent, the same as the (revised) growth rate of the previous month, as a result of continued withdrawal by the National Government of its deposits with the BSP.

Net foreign assets (NFA) in peso terms grew by 9.2 percent year-on-year in November from 8.7 percent in the previous month. Foreign exchange inflows coming from overseas Filipinos’ remittances and business process outsourcing receipts were the main contributors to the increase in the BSP’s NFA position. Meanwhile, the NFA of banks expanded due mainly to growth in banks’ foreign assets resulting from higher interbank loans, deposits with other banks, and investments in marketable debt securities.

The expansion in M3 remains manageable and consistent with the BSP’s current outlook for inflation and economic activity. Moving forward, the BSP will continue to monitor monetary conditions closely to ensure that overall domestic liquidity dynamics stay in line with the BSP’s price and financial stability objectives.

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