Demand for money continued to strengthen as growth in domestic liquidity or M3 rose by 12.2 percent to reach P2.13 trillion in February, based on data from the Depository Corporations Survey (DCS). This represents an acceleration from 11.5 percent year-on-year in January. On a month-on-month basis, however, M3 increased only slightly by 0.1 percent.
The expansion in domestic liquidity may be traced to the increased foreign exchange position of banks and the decline in the BSP’s net foreign liabilities. Deposit money banks reported a 19.5 percent expansion in their net foreign assets, outpacing the growth in net foreign liabilities of 11.16 percent. At the same time, the net international reserves of the BSP improved, as foreign assets increased by 2.2 percent and foreign liabilities decreased by 57.1 percent.
Meanwhile, net domestic credits to both the private and public sectors continued to grow. Credits to the public sector grew by 8.5 percent as banks continued to show a strong appetite for government securities. Similarly, credits to the private sector showed an improvement with the continued increase in bank lending, which grew at a moderate pace of 4.0 percent year-on-year in January. The stronger growth in M3 was also accompanied by a 121.6 percent increase in time deposits.
Going forward, monetary authorities will continue to provide an appropriate level of liquidity in the system without generating further pressures on consumer prices as uncertainties surrounding oil developments persist. The BSP will continue to watch closely against any build-up in inflation expectations.