Domestic liquidity growth slows in July

Domestic liquidity growth slowed down in July although the rate stayed in double-digit levels and averaged at 13.2 percent, compared to 13.4 percent in June.

The Bangko Sentral ng Pilipinas (BSP) reported that based on its Depository Corporations Survey (DCS), domestic liquidity, or M3, increased year-on-year but declined very slightly by 0.4 percent month-on-month.

The BSP said the expansion in liquidity was fueled mainly by strong inflows of foreign exchange from overseas Filipino workers’ remittances and portfolio investments.

"These inflows allowed the BSP to build up its foreign assets and enabled both the BSP and deposit money banks (DMBs) to reduce their foreign liabilities," said BSP Governor Amando M. Tetangco.

The BSP said the moderate expansion in credits to the public sector reflected the improving fiscal performance of the National Government (NG), with credits to the NG increasing moderately by three percent from the previous year’s level.

Credits to local government units (LGUs) and other public entities, on the other hand, registered a significant 8.3 percent increase from the previous year’s level. Credits to the private sector registered a marginal uptick, consistent with the observed continued weakness in commercial bank lending.

On the liabilities side, the BSP reported that the growth in liquidity was accompanied by significant increases in demand, savings and time deposits in the financial system.

Going forward, Tetangco said the Monetary Board would continue to closely monitor the evolving conditions for consumer prices and aggregate demand in order to determine the appropriate stance of monetary policy.

"Particular attention will be given to ensuring that the level of liquidity remains consistent with the BSP’s price stability objective," he said.