Domestic Liquidity Continues to Expand in August

Preliminary data show that domestic liquidity (M3) grew by 14.2 percent year-on-year to about ₱13.6 trillion in August. This was broadly steady from the 14.7-percent (revised) expansion in July. On a month-on-month seasonally-adjusted basis, M3 increased by 0.1 percent.


Demand for credit remained the principal driver of money supply growth, as domestic claims rose by 10.6 percent year-on-year in August from 12.3 percent in July. Claims on the private sector, driven mainly by bank lending to non-financial private corporations and households, grew at a weaker pace due to constrained economic activity and soft corporate sector performance. Loans for production activities continued to be driven by lending to key sectors such as real estate activities; information and communication; financial and insurance activities; electricity, gas, steam and air conditioning supply; and human health and social work activities. Meanwhile, growth in loans to households eased due to the continued slowdown in credit card, motor vehicle, and salary-based general consumption loans during the month. Albeit slower, net borrowings by the central government expanded by 49.8 percent in August from 51.9 percent (revised) in the previous month due partly to the government’s continued funding requirement for its efforts against the COVID-19 pandemic.


Meanwhile, net foreign assets (NFA) in peso terms expanded by 17.8 percent year-on-year in August, slower than the 23.3-percent (revised) growth in July. The expansion in the BSP’s NFA position reflected the increase in gross international reserves. Meanwhile, growth in the NFA of banks accelerated, as banks’ foreign assets rose on account of higher interbank loans and deposits with other banks.


Going  forward,  the  BSP  stands ready to deploy necessary measures to  ensure  adequate  liquidity and credit in support of domestic economic activity amid the COVID-19 health crisis.




Source: Bangko Sentral ng Pilipinas (BSP)