Domestic liquidity or M3 grew at a slower pace of 6.3 percent in December 2011 from 7.2 percent in November 2011 to reach P4.7 trillion. On a monthly basis, seasonally-adjusted M3 increased slightly by 0.4 percent from a growth of 1.0 percent (revised) in the previous month.
Money supply continued to be driven by net foreign assets (NFA) growth which slowed down by 14.1 percent in December from 15.6 percent in the previous month. BSP’s own NFA position grew by 21.3 percent in December from 24.6 percent in November, supported by steady foreign exchange inflows from overseas remittances and portfolio investments. The NFA of banks decreased further in December due to the continued increase in their foreign liabilities, combined with a decline in their foreign assets. Banks’ foreign liabilities rose due largely to higher placements made by foreign banks with local banks. Meanwhile, the fall in banks’ foreign assets was due in part to the decline in loan receivables from foreign banks.
While domestic credit growth remained strong on account of higher National Government, corporate and household borrowings, the BSP’s SDA operations moderated liquidity growth.
The BSP is of the view that overall liquidity conditions remain appropriate to support the country’s growth requirements despite the recent slowdown in the growth of domestic liquidity. Going forward, the BSP will continue to ensure that monetary conditions remain supportive of economic growth to the extent that the inflation outlook would allow.