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Domestic Liquidity Sustains Growth in April


Demand for money continued to grow in April 2009 as domestic liquidity or M3 rose by 13.7 percent year-on-year. This growth was a slight deceleration from the 15.6 percent recorded in March 2009 but was notably higher than the 0.9 percent expansion posted in the same month a year ago. On a monthly basis, the expansion of seasonally-adjusted M3 declined marginally by 0.5 percent in April from a growth of 0.4 percent in the previous month.

The expansion in liquidity was fueled mainly by the continued rise in net foreign assets (NFA) at 20.2 percent in April, which can be traced to the sustained growth in the net foreign assets of the BSP and the banks at 19.8 percent and 22.5 percent, respectively. Net foreign assets rose as the BSP continued to build up its international reserves and banks settled a significant portion of their foreign liabilities.

Meanwhile, the growth in net domestic assets (NDA) slowed down to 4.2 percent year-on-year in April from the previous month’s 9.7 percent, as the decline in net other items (at 47.2 percent) partially offset the 16.3 percent increase in net domestic credits. Growth in credits extended to the private sector accelerated to 19.0 percent from 18.0 percent in the previous month. On the other hand, growth in credits extended to the public sector slowed down to 11.2 percent from 12.2 percent, reflecting the deceleration in lending to the National Government (from 13.2 percent to 12.0 percent), as well as to local government units and other public entities (from 9.0 percent to 8.8 percent).

The BSP will continue to monitor the level of money in the financial system to ensure an adequate supply of liquidity for the orderly functioning of the markets and to provide for the economy’s growth requirements, while guarding against any potential build-up in price pressures.

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