Domestic liquidity reaches P6.3T

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Credit to the domestic economy continue to be the growth driver of the country’s money supply, which went up to P6.3 trillion in October, data from the the Bangko Sentral ng Pilipinas (BSP) showed on Friday.

The BSP data showed that domestic liquidity or M3 recorded a year-on-year 32.5-percent expansion at end-October, slightly faster than the 31.3-percent revised growth in the previous month.

Month-on-month, seasonally adjusted M3 increased by 2 percent, similar to the expansion recorded in September.

“Money supply growth was driven largely by the sustained expansion in domestic claims,” the central bank stated, noting that domestic claims grew by 11.6 percent in October from 10.9 percent a month ago.

The BSP said that the growth in domestic claims can be attributed to the continued increase in claims in the private sector, which grew 16.2 percent in line with the sustained growth in bank lending.

On the other hand, net claims on the central government rose slightly by 0.5 percent for the month, largely as a result of the increase in credits to the national government.

The BSP data also showed that its net foreign assets (NFA) grew 10.5 percent year-on-year compared to 7.7 percent in September.

“The BSP’s NFA position improved on the back of robust foreign exchange inflows from remittances, business process outsourcing receipts and portfolio investments,” the central bank said.

NFA of banks also increased as banks’ foreign assets rose mainly to the growth in foreign loans and receivables, at the same time that banks’ foreign liabilities declined because of reduced placements and deposits of foreign banks with their local branches.

The monetary authority also said that the operational adjustment in its special deposit account (SDA) facility also contributed to the M3 increase in October.

During a speech at the Foreign Correspondents Association of the Philippines Media Forum, BSP Governor Amando Tetangco Jr. said that the uptick in liquidity growth will only be for a short transition period, as banks adjust to operational refinements to the access to the BSP’s SDA facility.

“With banks rebalancing portfolios to take these changes into consideration, banks could be expected to more expeditiously and effectively channel the SDA funds to the productive sectors,” he said.

Meanwhile, the central bank assured that a temporary period of high M3 growth is not expected to fan inflationary pressures, as its latest baseline forecasts continue to track the lower end of the inflation target in 2013.

The BSP added that it is ready to deploy appropriate measures as need to ensure that liquidity conditions continue to be in line with the central bank’s objective of maintaining price and financial stability conducive to sustainable economic growth.

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