The central bank said domestic liquidity grew by 8.2 percent year-on-year to P14.64 trillion in October, slightly lower compared to the 8.3 percent expansion in September.
The Bangko Sentral ng Pilipinas (BSP) in a statement late Monday, Nov. 29, said that it will “ensure appropriate liquidity conditions” to preserve “ongoing policy support to domestic economic activity (which is) consistent with its price and financial stability objectives.”
“Monetary authorities will remain patiently data-dependent in maintaining monetary accommodation in order to help achieve a sustainable recovery from the pandemic,” said the BSP.
Based on the latest preliminary data on domestic liquidity or M3, on a month-on-month seasonally-adjusted basis, M3 increased by 0.7 percent.
The BSP said domestic claims were up by 7.5 percent year-on-year in October from 7.7 percent in September. This grew due to the bigger net claims on the central government and from bank lending to the private sector which has turned positive for the last three months.
Net claims on the central government increased by 21.5 percent from 24.4 percent because of sustained borrowings by the national government. Claims from the private sector, which the BSP said was driven by bank lending to non-financial private corporations, went up by 2.6 percent in October from 3.1 percent in September.
The net foreign assets (NFA) in peso terms also grew by 8.8 percent in October from 11.3 percent in September. The BSP said its NFA position “moderated” in October. It added that the NFA of banks were increasing in a “broadly steady pace” as banks’ foreign assets improved due to the higher deposits of foreign banks’ local branches.
As of mid-November, the BSP has infused P2.3 trillion in liquidity to the financial system as part of its pandemic response.
At the onset of the pandemic in 2020, the BSP applied extraordinary liquidity measures to help the government fund the anti-pandemic measures. These include provisional advances to the national government, purchases of government securities in the secondary market, and payment of advance dividends even though the BSP is no longer required to remit dividends to the government.
Other measures, which infused fresh liquidity to the financial system primarily to “boost market confidence” and to ensure “availability of low cost credit resources”, include the BSP’s 200 basis points interest rate cuts and the reduction of the reserve requirement ratio.