The country’s money supply grew 18.5 percent year-on-year in August on sustained demand for credit from the domestic economy, the central bank said.
Domestic liquidity or M3 — which measures the total amount of cash and cash-equivalent of securities circulating within the economy—reached P7.1 trillion in August, rising by 18.5 percent from a year-earlier level.
Bangko Sentral ng Pilipinas (BSP) data released on Tuesday showed the rise in M3 was faster than the revised 17.9 percent year-on-year expansion recorded in July.
Month-on-month, seasonally adjusted M3 increased 0.8 percent following a revised 2.3 percent rise in the preceding month.
“Money supply continued to increase due largely to sustained demand for credit in the domestic economy,” the BSP said.
The central bank said it expects domestic liquidity growth will remain in line with the pace of expansion in the real sector as previous monetary adjustments continue to work their way through the economy.
In a bid to mop up excess liquidity from the financial system, the Monetary Board of the BSP hiked the reserve requirement ratio for banks to 20 percent at its May 8 meeting. On September 11, the policy-setting body raised the rate paid on the special deposit account facility by 25 basis points to 2.50 percent from 2.25 percent.
“Going forward, the BSP remains prepared to deploy all necessary measures to ensure that liquidity conditions continue to be in line with the BSP’s objective of maintaining price and financial stability,” the central bank said.
Domestic claims in August expanded by 13.9 percent from 12.7 percent in July, reflecting in part the continued expansion in credits to the private sector, the BSP said.
The bulk of the new loans during the month was channeled into key production sectors such as wholesale and retail trade, real estate, renting, and business services, utilities, financial intermediation, and manufacturing.
At the same time, public sector credit grew 4.7 percent in August following a revised contraction of 3.2 percent in July, as the deposits of the national government with the central bank increased at a slower pace, “due largely to the withdrawal of funds by the NG [national government]for the redemption of maturing government securities,” the BSP said.
Net foreign assets, or the net position of the central bank relevant to transactions with non-residents, grew 1.4 percent in peso terms, the central bank added.