01.17.2013

Domestic liquidity (M3) grew by 9.8 percent year-on-year (y-o-y) in November, faster than the 8.6 percent recorded in the previous month, to reach P4.9 trillion. On a monthly basis, seasonally-adjusted M3 likewise recorded a higher growth rate of 1.9 percent compared to the 0.9 percent (revised) month-on-month increase in October.

The growth of money supply was driven by the expansion of net domestic assets (NDA) at 18.4 percent y-o-y in November from 13.3 percent in the previous month, mainly as a result of the sustained increase in net domestic credits. Net domestic credits grew by 8.0 percent, buoyed by the expansion in the claims on the private sector due to solid lending activity by commercial banks. Meanwhile, claims on the public sector contracted further by 9.5 percent (after declining by 7.6 percent in the previous month) as deposits of the National Government increased, reflecting the proceeds from the issuance of 25-year Retail Treasury Bonds in October.

Meanwhile, net foreign assets (NFA) decreased by 1.0 percent y-o-y in November, a reversal of the 2.8 percent growth in October. This was due mainly to the continued decline in banks' NFA as their foreign liabilities increased further due in part to higher placements and deposits made by foreign banks with their local branches, while their foreign assets contracted due to the decline in loan receivables from foreign banks.  On the other hand, the BSP's NFA position increased by 3.3 percent, supported by steady foreign exchange inflows from overseas remittances and portfolio investments.

The faster expansion in domestic liquidity during the month reflects in part the impact of previous policy actions of the BSP to help support non-inflationary economic growth amid ongoing weaknesses in the global economy. Going forward, the BSP will monitor monetary conditions closely to ensure that liquidity in the financial system remains supportive of economic activity while ensuring low and stable inflation.


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