Money supply surges 9.8% in August

Domestic borrowing by the private sector led to a 9.8-percent surge in domestic liquidity last August, the central bank said yesterday.

The Bangko Sentral ng Pilipinas (BSP) reported that growth in domestic liquidity, which represents the quality of money available for financing economic activity accelerated in August from the 4.1-percent expansion recorded last July.

Domestic liquidity growth has been under tight watch since last year when a strong dollar surge pushed it up to a level that required the central bank to start mopping up excess money supply.

This year, however, the BSP said domestic liquidity growth has been slowing down, taking away one factor that could have aggravated the country’s rising inflation rate.

But surging oil prices have fueled inflation and the BSP has been raising its policy rates in increments, announcing a 25-point hike in June followed by a 50-point hike in July and another 25-point hike in August.

Based on the Depository Corporations Survey (DCS) of the BSP, domestic liquidity or M3 growth accelerated in August as a result of the strong growth in net domestic assets or NDA, which expanded by 10 percent.

The BSP attributed the NDA growth to the sustained increase in credits extended to the private sector which grew 19 percent compared with the 12.8-percent growth recorded in the previous month.

The BSP said the data were generated from the Financial Reporting Package (FRP), the new system of bank reports consistent with the International Accounting Standards (IAS) and International Financial Reporting System (IFRS).  

The BSP said the growth in private domestic borrowing was only partly offset by the decline in credit extended to the public sector which dropped 1.9 percent.

National Government (NG) borrowing from the domestic credit market has increased but the BSP said the drop in net lending to the NG resulted from the build-up in NG deposits.

On the other hand, the BSP said there was a slowdown in the expansion of net foreign assets of foreign corporations from 12.5 percent in July to only 5.4 percent in August. — Des Ferriols