Domestic liquidity (M3) rose at a steady rate of 7.2 percent year-on-year in February 2012 to reach P4.5 trillion. This was the same growth rate in M3 recorded a month earlier. On a monthly basis, seasonally-adjusted M3 increased by 1.1 percent from a growth of 1.0 percent in the previous month.
Money supply growth continued to be driven by the sustained increase in net foreign assets (NFA) at 13.1 percent in February. The BSP’s own NFA position grew by 18.1 percent, supported by steady foreign exchange inflows from overseas remittances, merchandise exports, and portfolio investments. Meanwhile, the NFA of banks decreased further in February due to the continued rise in their foreign liabilities, combined with a decline in their foreign assets. Banks’ foreign liabilities rose as a result of 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 contraction in loan receivables from foreign banks.
Similarly, net domestic credits expanded at a steady pace of 13.4 percent in February on account of higher private and public sector borrowings. However, this was offset by the continued rise in the placements of authorized counterparties in the BSP SDA facility, which has served to moderate liquidity growth.
The steady growth in domestic liquidity indicates that liquidity in the financial system remains ample to fund the economy’s growth requirements. Going forward, the BSP will continue to ensure that monetary conditions remain supportive of economic growth in a non-inflationary context.