EFFORTS to curb inflation caused domestic liquidity to post its slowest growth in six months at 5.7 percent, according to data released by the Bangko Sentral ng Pilipinas (BSP).
BSP said domestic liquidity (M3) increased to P16.2 trillion in July 2023 from P15.37 trillion in July 2022.
The data also showed the country’s M3 increased by about 0.2 percent from P16.35 trillion in June 2023.
“[This was] amid restrictive monetary policy/stance in recent months, such as siphoning off some of the excess peso liquidity in the financial system as part of the measures to bring down elevated inflation, curb inflationary pressures, and eventually fulfill the price stability mandate of the local monetary authorities,” Rizal Commercial Banking Corporation Chief Economist Michael L. Ricafort said.
Ricafort also said the 5.7-percent growth of M3 was among the slowest in more than two years or since May 2021. He added that it was among the slowest in more than 11 years or since August 2012.
“Relatively lower amount of maturing government securities/Treasury bonds from May-July 2023, especially in July 2023, could have also partly led to the net month-on-month reduction in M3/domestic in the financial system in recent months, on top of measures to siphon off some of the excess peso liquidity from the financial system,” Ricafort said.
The BSP said domestic claims rose 8.9 percent year-on-year in July from 10.1 percent in the previous month. Claims on the private sector expanded by 8.2 percent in July from 7.9 percent in June, driven by growth in bank lending to non-financial private corporations and households.
Net claims on the central government grew by 12.5 percent in July from 17.2 percent in June, due mainly to the borrowings by the National Government.
Net foreign assets (NFA) in peso terms fell by 2.6 percent year-on-year in July following a 2.8-percent decline in June.
The BSP’s NFA position decreased by 0.5 percent in July after contracting by 0.6 percent in the previous month.
The central bank also said the NFA of banks declined due to a contraction in interbank loans receivable and deposits maintained with nonresident banks.
“Looking ahead, the BSP will continue to ensure that domestic liquidity conditions remain consistent with the prevailing stance of monetary policy, in line with the BSP’s price and financial stability objectives,” BSP said.
The M3 may also be derived as Net Foreign Assets + Domestic Claims, net of Liabilities excluded from broad money and transferable and other deposits in foreign currency.
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