Domestic liquidity (M3) increased further by 10.8 percent year-on-year (y-o-y) in January to reach P5.0 trillion. This growth was broadly similar to the 10.6 percent expansion recorded in the previous month. On a monthly basis, seasonally-adjusted M3 expanded by about 1.3 percent, almost unchanged compared to the rate in December.
Money supply grew by 23.3 percent y-o-y in January from 19.2 percent in the previous month, driven by the expansion in net domestic assets (NDA) following the sustained increase in credits to the private sector consistent with the robust lending activity of commercial banks. Claims on the private sector rose by 14.8 percent in January. Meanwhile, claims on the public sector contracted at a slower pace of 7.8 percent in January compared to the decline of 14.0 percent in the previous month, as the growth of National Government deposits slowed down.
Meanwhile, net foreign assets (NFA) decreased further by 1.7 percent y-o-y in January following a decline of 0.1 percent in December. The BSP’s NFA position increased by 4.5 percent, supported by steady foreign exchange inflows from overseas remittances, portfolio investments, and BPO receipts. However, the NFA of banks continued to contract during the month, driven largely by the sustained increase in their foreign liabilities due, in turn, to higher placements and deposits made by foreign banks with their local branches. Meanwhile, banks’ foreign assets continued to decrease due to the decline in their loan receivables.
The sustained expansion in domestic liquidity indicates that previous policy actions of the BSP to help support non-inflationary economic growth continue to work their way through the economy. Going forward, the BSP will closely monitor monetary conditions to ensure that liquidity in the financial system remains in line with the BSP’s price and financial stability objectives.