Based on preliminary data, domestic liquidity (M3) grew by 3.8 percent year-on-year to P1.62 trillion as of end-August 2003. The continued growth in the level of domestic credits to the public and private sectors as well as the expansion in the net foreign assets (NFA) of the monetary system contributed to the rise in M3 growth from 3.6 percent in July 2003.
Increased investments in foreign-currency denominated assets by deposit money banks (DMBs), along with a decline in their foreign liabilities, helped improve the level of NFA of the monetary system. Meanwhile, increased bank investments in fixed-income government securities continued to fuel growth in credits to the public sector. Loans to the National Government and local government units (LGUs) and other government entities grew by 6.9 percent and 68.1 percent, respectively, during the period. Net credits to the private sector likewise continued to grow by 2.9 percent year-on-year in August. However, this was lower than the 3.8 percent increase recorded in the previous month.
The increase in domestic liquidity was anchored on the steady but modest improvement in domestic demand, as reflected in the various indicators of production and personal consumption. For instance, the value of production index (VAPI) in the manufacturing sector as part of the Monthly Integrated Survey of Selected Industries (MISSI) published by the National Statistics Office, grew by 12.9 percent in July, an improvement from the 6.6 percent growth in the previous month. Meanwhile, the volume of production index (VOPI) grew by 4.4 percent, a reversal from the 1.5 percent decline in the previous month. Credit card receivables likewise continued to trend upward based on BSP data as of end-June 2003, growing by 13.9 percent from its level in the previous year and by 4.3 percent from its level in the previous quarter. Energy consumption also continued to register growth during the year as Meralco sales in July 2003 rose by 4.5 percent year-on-year, an improvement from the 3.7 percent increase in the previous year. In addition, loans outstanding of commercial banks continued rising steadily, registering a 3.7 percent growth in July 2003, a turnaround from the 2.9 percent decline in July 2002.
Meanwhile, seasonally-adjusted M3 level as of end-August was registered at P1.65 trillion, indicating a month-on-month increase of 0.9 percent, an improvement from the previous month’s decline of 0.1 percent.
Going forward, monetary authorities will take into account the above developments in assessing the stance of monetary policy to ensure that the policy environment will continue to provide adequate liquidity to support stronger economic activity while remaining compatible with price stability.