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BUT SLIGHTLY LOWER THAN JUNE’S

The country’s money supply continued to expand in July, although at a slower pace than the previous month, Bangko Sentral ng Pilipinas (BSP) yesterday said.

Domestic liquidity or M3 expanded by 10.2 percent year-on-year in July compared to the previous month’s growth of 10.3 percent.

On a monthly basis, seasonally-adjusted M3 growth went up by 1.2 percent, a turnaround from the 0.2 percent (revised) contraction in the previous month.

BSP Gov. Amando Tetangco said the steady growth of M3 will "help ensure adequate liquidity available to support the funding requirements of firms and households, consistent with the economy’s stronger growth momentum."

He added that the BSP will keep a close watch over developments in domestic liquidity to ensure price and financial stability.

The central bank said the sustained increase in domestic liquidity was due mainly to the continued growth in net foreign assets (NFA) at 15.9 percent in July from 22.7 percent in June.

"The steady rise in the BSP’s NFA position of 18.5 percent can be traced to higher foreign exchange inflows from overseas remittances, portfolio investments, and export receipts," Tetangco said.

He added that the NFA of banks climbed by 2.4 percent due to the increase in their holdings of marketable securities.

Net domestic assets (NDA) inched up by 2.8 percent in July after contracting by 0.9 percent in the previous month, buoyed up by stronger lending to both the public and private sectors.

Credits to the public sector rose by 11.4 percent during the month, owing to the 8.8 percent expansion in credits extended to the National Government with the increase in the outstanding level of government securities in July.

In addition, credits extended to local government units and other public entities grew by 20.6 percent as loans provided to the sector increased.

Credits extended to the private sector rose similarly by 10 percent, consistent with the observed uptrend in bank lending activities as the country’s economic prospects continued to improve.

Policymakers use M3 for their monetary decisions because of its impact on inflation.

The National Statistics Office on Tuesday said that the country inflation in August slightly went up to 4 percent from 3.9 percent in July due to slightly higher prices of food, fuel, light and water.

Tetangco said this is well-within the forecast range of between 3.6 to 4.5 percent set by the BSP last week.

"These support our view that the inflation environment during our policy horizon remains manageable," Tetangco said.

The August actual inflation rate keeps the average inflation rate for the first 8 months of the year at 4.2 percent.

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