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Domestic Liquidity Growth Eases in October

11.29.2018

Preliminary data show that domestic liquidity (M3) grew by 8.2 percent year-on-year to about ₱11.1 trillion in October 2018. This was slower than the 9.8-percent (revised) expansion in the previous month. On a month-on-month seasonally-adjusted basis, M3 decreased by 0.1 percent.

Demand for credit remained the principal driver of money supply growth. Domestic claims grew by 15.2 percent in October, faster than the 14.8-percent (revised) growth in September 2018 due mainly to the sustained growth in credit to the private sector. Loans for production activities continued to be driven by lending to key sectors such as financial and insurance activities; wholesale and retail trade, repair of motor vehicles and motorcycles; real estate activities; manufacturing; electricity, gas, steam and airconditioning supply; and construction. Meanwhile, the growth in loans for household consumption slowed down owing to the slower expansion in credit card loans, motor vehicle loans as well as the contraction in salary-based general purpose consumption loans and other types of household loans. Net claims on the central government grew by 11.3 percent in October, broadly steady from 11.4 percent (revised) in the previous month.

Net foreign assets (NFA) in peso terms contracted by 5.2 percent year-on-year in October after declining by 0.9 percent in the previous month. The BSP’s NFA position contracted in October relative to a year ago, reflecting the decrease in gross international reserves. Likewise, the NFA of banks fell due to the slower expansion in banks’ foreign assets as growth in loans and investments in marketable debt securities eased.

The BSP will continue to closely monitor domestic liquidity dynamics to ensure that monetary conditions remain supportive of the BSP’s price and financial stability objectives.

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