Domestic liquidity or M3 grew by 7.2 percent year-on-year in January, a slowdown from the previous month’s growth of 9.0 percent. This was also lower than the 21.9 percent expansion recorded during the same month a year ago. On a monthly basis, seasonally-adjusted M3 declined by 1.0 percent, compared to the 2.1 percent increase in the previous month.
The steady rise in net foreign assets (NFA) of depository corporations continued to drive the expansion in domestic liquidity. Credit extended to the private sector sustained its expansion at 7.6 percent from the 7.2 percent growth posted in the previous month. Meanwhile, credit extended to the public sector reversed to a positive growth of 6.0 percent as lending to the national government (NG) picked up even as lending to local government units (LGUs) and other public entities continued to decline. However, the growth in net domestic assets (NDA) declined by 3.2 percent in January, reflecting a negative growth for the sixth consecutive month, as the other assets/liabilities account under the Net Other Items (which includes SDAs and RRPs) continued to register a negative balance following liquidity measures implemented by the BSP in May 2007
The BSP closely monitors the movement of domestic liquidity because it is one of the major indicators in the assessment of the inflation outlook. This assessment helps the BSP to ensure that the liquidity level is consistent with price stability while being supportive of the growth requirements of the economy.