Demand for money remained strong in March, with domestic liquidity posting a double-digit growth of 10.3 percent year-on-year compared to 9.9 percent in the previous month. On a monthly basis, the growth of seasonally-adjusted M3 at 1.0 percent in March was relatively steady from the 0.9 percent posted in February.
The sustained expansion of domestic liquidity was due mainly to the strong growth in net foreign assets (NFA). In particular, NFA increased by 18.0 percent with the rise in the NFAs of both the BSP and the banking system. The BSP’s NFA continued to expand, recording a 14.0 percent growth, while banks posted a markedly faster NFA growth of 39.8 percent due to the combined acceleration in the growth of foreign assets and the slowdown in the expansion of foreign liabilities.
Net domestic assets (NDA) also expanded in March, albeit at a slower rate of 2.4 percent from 5.9 percent in February, as the growth in credits extended to the public and private sectors moderated. The growth in credits extended to the public sector decelerated to 9.1 percent in March from 13.8 percent a month ago, reflecting the slower expansion of credits extended to the National Government, even as lending to local government units (LGUs) and other public entities rose. The growth in credits extended to the private sector also slowed down to 8.3 percent from 10.1 percent in the preceding month, pulled down mainly by the contraction in lending to the manufacturing sector.
Governor Amando M. Tetangco, Jr. noted that the continued strong growth of domestic liquidity reflects, to some extent, the impact of the flow of global liquidity to liquidity-receiving countries like the Philippines. Governor Tetangco stressed that the BSP will continue to monitor closely domestic liquidity conditions, particularly in light of the potential for accelerating cross-border capital flows, to ensure their consistency with the BSP’s price and financial stability objectives.