The growth of domestic liquidity or M3 rose to 7.2 percent year-on-year in January 2012 from 6.3 percent in December 2011 to reach P4.5 trillion. On a monthly basis, seasonally-adjusted M3 increased by 1.0 percent from a growth of 0.4 percent in the previous month.
Money supply growth continued to be driven by the increase in net foreign assets (NFA), which rose by 13.1 percent on a year-on-year basis in January from 14.1 percent in the previous month. The BSP’s own NFA position grew by 18.2 percent, supported by steady foreign exchange inflows from overseas remittances and portfolio investments. On the other hand, the NFA of banks decreased further in January due to the continued rise in their foreign liabilities, combined with a sustained decline in their foreign assets. Banks’ foreign liabilities rose due largely to higher placements and deposits made by foreign banks with their local branches and other banks. Meanwhile, the fall in banks’ foreign assets was due in part to the decrease in assets (such as foreign debt securities) held to maturity by banks.
The steady expansion of domestic credits on account of higher private and public sector borrowings combined with the slower rise in the placements of authorized counterparties in the BSP SDA facility also contributed to the acceleration in domestic liquidity growth.
The steady growth in domestic liquidity indicates that liquidity in the financial system can amply fund the economy’s growth requirements. Going forward, the BSP will continue to closely monitor monetary conditions to ensure that funds are available to support non-inflationary growth.