Domestic liquidity (M3) expanded by 5.6 percent year-on-year in March 2012, slower than the 7.2 percent growth recorded a month earlier to reach P4.5 trillion. On a monthly basis, seasonally-adjusted M3 declined marginally following a growth of 1.1 percent in the previous month.
Money supply growth continued to be driven by the sustained increase in net foreign assets (NFA) at 11.8 percent in March. The BSP’s own NFA position grew by 14.3 percent, supported by steady foreign exchange inflows from overseas remittances, merchandise exports, and portfolio investments. On the other hand, the NFA of banks continued to decrease in March due to the sustained 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.
Liquidity growth was also moderated by the slower expansion in net domestic credits, due largely to higher National Government (NG) deposits with the BSP, combined with the faster rise in the net other items account (which includes, among other things, revaluation and capital and reserve accounts as well as placements of authorized counterparties in the BSP SDA facility). The continued rise in credits extended to the private sector was offset by the slight decline in credits extended to the public sector as NG deposits increased at a faster pace with the approach of the deadline for income tax payments.
The continued 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 setting.