Credit demand boosts liquidity

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Domestic liquidity expanded by 9.5 percent in October, the Bangko Sentral ng Pilipinas (BSP) reported over the weekend, driven by sustained demand for credit.

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Preliminary data released by the central bank placed M3 at P7.907 trillion in October, up from P7.848 trillion in September when growth hit a revised 8.7 percent. Month-on-month and seasonally adjusted, M3 growth was 1.1 percent.

“Money supply continued to expand due largely to sustained demand for credit,” the central bank said in a statement, adding that this was an indication of sufficient liquidity to support economic growth.

“Going forward, the BSP will continue to monitor liquidity in the financial system to ensure that monetary conditions remain consistent with BSP’s objectives to maintain price and financial stability,” it added.

Domestic claims grew by 12.4 percent, down from the revised 12.7 percent posted in September.

The bulk of the bank loans went into real estate; electricity, gas, steam and air-conditioning supplies; wholesale and retail trade and repair of motor vehicles and motorcycles; financial and insurance activities; and the construction sectors.

Lending to the public sector rose by 12.1 percent, slower than the revised 16.5 percent increase in the preceding month.

Net foreign assets (NFA) in peso terms grew by 8.2 percent from September’s revised 6.8 percent, the central bank said, adding that its own NFA position continued to expand due to robust foreign exchange inflows, coming mainly from overseas Filipinos’ remittances, business process outsourcing receipts and portfolio investments.

The NFA of banks, meanwhile, also increased as their foreign assets grew faster compared to foreign liabilities. Foreign assets grew primarily because of investments in marketable debt securities, while foreign liabilities were boosted by increased deposits and placements by foreign banks, the central bank said.

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