MANILA, Philippines – Domestic liquidity, technically known as M3, continued to ease in October following the Bangko Sentral ng PIlipinas’ adjustments in banks’ reserve requirements and special deposit account (SDA) rate.
M3—the broadest measure of liquidity—expanded 15.4 percent to P7.208 trillion last month, slower than the 16.2 percent growth recorded in September and 18.3 percent in August.
But the BSP said money supply continued to rise in October amid sustained demand for borrowings.
Domestic claims increased 18.2 percent to P6.667 trillion in October on continued expansion of credits to the private sector.
“In particular, the bulk of bank loans during the month was channeled to key production sectors such as manufacturing, real estate, renting, and business services, wholesale and retail trade, utilities, and financial intermediation,” the central bank said.
Public sector loans also went up 19.1 percent to P1.069 trillion last month as deposits of the National Government with the BSP fell amid the former’s withdrawal of funds for maturing government securities.
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Net foreign assets (NFA) at the same time grew 3.4 percent to P3.683 trillion in October.
“The NFA of banks increased as banks’ foreign assets expanded at a faster pace relative to that of their foreign liabilities,” the BSP said.
The BSP said it expects domestic liquidity growth to further moderate in the coming months following previous monetary policy adjustments.
The BSP earlier raised banks’ reserve requirement ratios by 200 basis points and the SDA rate by 25 basis points to 2.25 percent in order to pull down the relatively high liquidity growth.
M3 growth reached 30 percent in July last year and remained above that threshold after the central bank reduced the SDA rate by 150 basis points last year and restricted deposits of investment management accounts or the singular fund accounts offered usually to retail investors in the facility.
Discouraging investments in the SDA was done so funds would be put instead to other activities and instruments beneficial to the growth of the economy.
“Going forward, the BSP remains prepared to take appropriate action as needed to ensure that monetary conditions continue to support price and financial stability,” the BSP said.
