Domestic liquidity or M3 sustained its strong growth at 26.3 percent year-on-year in April, from the 24.6 percent increase registered in the previous month. On a month-on-month basis, seasonally adjusted M3 growth rose further to 2.8 percent from 2.0 percent in March.
The sustained expansion in domestic liquidity continued to be driven by the increase in the net foreign asset (NFA) position of depository corporations (DCS), following the steady rise in overseas Filipino workers’ (OFW) remittances, export earnings, as well as foreign direct and portfolio investment inflows. Net domestic credit growth also contributed to the expansion of domestic liquidity. Credit to the public sector continued to grow, although at a slower pace of 18.2 percent from 20.7 percent in the previous month. Meanwhile, credit to the private sector rose by 5.2 percent from 4.0 percent, as lending to entities other than financial corporations accelerated.
While the strong liquidity growth has not affected the current downtrend in inflation, the BSP has implemented new monetary measures effective 10 May 2007, which are expected to absorb additional liquidity from the system and ensure that the inflation outlook remains benign over the policy horizon. The BSP will continue to closely monitor the impact of the new measures on monetary conditions, the results of which would serve as basis for subsequent monetary policy actions.