Domestic claims grew by 6.7 percent in October from 7.5 percent in the previous month due mainly to the sustained growth in credit to the private sector.

Domestic liquidity, also known as M3, showed further improvement for the month of October, the Bangko Sentral ng Pilipinas (BSP) reported on Friday.

Preliminary data from the BSP show October M3 growing by 8.5 percent year-on-year, faster than the posted 7.7 percent growth in September, which translates to about P12.1 trillion.

According to the central bank, credit demand remained to be the primary driver of money supply.

“Domestic claims grew by 6.7 percent in October from 7.5 percent in the previous month due mainly to the sustained growth in credit to the private sector,” the BSP said.

“Loans for production activities continued to be driven by lending to key sectors such as real estate activities; financial and insurance activities; construction; electricity, gas, steam and air-conditioning supply; and wholesale and retail trade, repair of motor vehicles and motorcycles,” it added.

Bank lending on the other hand, contracted with universal and commercial bank outstanding loans net of reverse repurchase (RRP) placements with the BSP growing at a slower rate of 9.3 percent.

Meanwhile, bank lending inclusive of RRP slowed to just 9.1 percent from the registered 10.2 percent in September.

“On a month-on-month seasonally-adjusted basis, commercial bank loans net of RRP grew by 0.3 percent,” the BSP said.

To recall, the BSP had significantly reduced its deposit reserve requirement for banks, infusing a massive flush of liquidity in the financial market. Private sector economists expect an additional P360 billion to P440 billion in terms of additional cash with the 400-basis point reduction for such by the BSP.