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M3 Growth Improves Further to 9.5 Percent in October


Based on preliminary data, domestic liquidity (M3) grew by 9.5 percent year-on-year in October 2002 from 9.0 percent in the previous month, marking a sustained acceleration since July of this year. Domestic liquidity rose to P1.596 trillion as of end-October 2002 from P1.587 trillion in the previous month.

The expansion in domestic liquidity can be attributed mainly to the sustained rise in the net foreign assets (NFA) of the monetary system as well as the continued growth in credits to the National Government. The continued dollar remittances by overseas Filipino workers (OFWs) together with the increased foreign exchange receipts from exports boosted the NFA position of banks. This was further supported by the steady demand for government securities by investors, as reflected in the 8.3 percent year-on-year growth in the level of credits to the National Government as of end-October 2002. This growth rate, however, was slightly lower than the 9.1 percent increase recorded in the previous month.

The increasing demand for liquidity observed in recent months indicated a strengthening of economic activity amidst the accommodative monetary policy stance. The growth in liquidity was accompanied by a strong demand for goods and services as reflected in the sustained growth in the country’s Gross Domestic Product (GDP) at 3.8 percent year-on-year during the third quarter of 2002, up from the 3.0 percent growth recorded during the same period last year.

The growth in M3 is expected to further strengthen toward the end of the year with the increased consumption and spending by households and businesses during the holiday season. Going forward, the BSP will continue to keep a watch on domestic liquidity conditions to ensure an environment that is supportive of the economy’s growth and inflation objectives.

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