Domestic liquidity or M3 reached P4.2 trillion in April 2011, higher by 7.3 percent relative to a year earlier. On a monthly basis, seasonally-adjusted M3 contracted slightly by 0.6 percent from a growth of 1.4 percent in the previous month.
The steady expansion in net foreign assets (NFA)-at 20.2 percent in April-fueled the growth of domestic liquidity. The BSP's NFA position grew by 41.3 percent due in part to sustained foreign exchange inflows from overseas remittances as well as portfolio and direct investments. Meanwhile, the NFA of banks contracted further by 92.4 percent from a decline of 85.7 percent in the previous month as their foreign liabilities rose while their foreign assets declined. Banks' foreign liabilities increased with the rise in bills payable as well as higher placements and time deposits made by the head offices/other branches of foreign banks with their Philippine branches. Meanwhile, the contraction of banks' foreign assets was due in part to the decline in loan receivables from foreign banks.
Net domestic assets (NDA), meanwhile, decreased anew by 9.3 percent in April following a decline of 3.5 percent in March. This was due largely to the continued expansion of the net other items account (which includes revaluation and capital and reserve accounts as well as SDA placements of trust entities). By contrast, net domestic credits rose by 7.2 percent, due to a further increase in credits extended to the private sector at 11.9 percent. This trend is consistent with the broadly steady growth of bank lending to the productive sectors of the economy. Meanwhile, the growth in credits extended to the public sector declined due mainly to the contraction in credits extended to the National Government (NG) indicating ample liquidity as reflected in the increase in NG deposits with the BSP and other banks during the month.
The BSP continues to closely monitor monetary conditions to ensure that the amount of liquidity in the financial system remains in line with the BSP's price and financial stability objectives.