Domestic liquidity or M3 grew by 6.6 percent year-on-year in February, slower than the previous month’s growth of 7.2 percent. This was also lower than the 22.0 percent expansion recorded during the same month a year ago. However, on a monthly basis, seasonally-adjusted M3 increased by 0.4 percent, a reversal of the 0.7 percent decline in the previous month.
The slowdown in the growth of domestic liquidity can be traced to both the decline in net domestic assets (NDA) and the slowdown in the growth of net foreign assets (NFA). NFA grew by 16.7 percent in February, compared to the 20.3 percent year-on-year growth in the previous month. This developed as a result of the decline in the net foreign assets of other depository corporations.
Credit extended to the private sector sustained its expansion at 10.1 percent from the 7.7 percent growth posted in the previous month. Credit extended to the public sector also rose by 11.6 percent as lending to the national government (NG) picked up at 17.6 percent even as lending to local government units (LGUs) and other public entities continued to decline. However, NDA declined for the seventh consecutive month in February, as the Net Other Items (which includes SDAs and RRPs) registered a negative balance, following the BSP’s implementation of liquidity management measures in May 2007.
The BSP will continue to closely monitor domestic liquidity developments to ensure that the level of liquidity in the system remains adequate to sustain the economy’s growth momentum. At the same time, it will continue to keep a watchful eye on the risks to the inflation outlook so that it can formulate appropriate and prompt policy responses.