Domestic liquidity (M3) grew by 9.9 percent year-on-year (y-o-y) in February to reach P5.0 trillion. This growth was slightly slower than the 10.2 percent (revised) expansion recorded in the previous month. On a monthly basis, seasonally-adjusted M3 expanded at a slower pace of 0.6 percent compared to the 0.8 percent (revised) month-on-month growth in January.
The growth in money supply was driven largely by the expansion in net domestic assets (NDA). NDA grew by 19.7 percent y-o-y in February from 21.9 percent (revised) in the previous month following the sustained increase in credits to the private sector, buoyed by the robust lending activity of commercial banks. Claims on the private sector increased by 14.9 percent in February. By contrast, claims on the public sector contracted at a slower pace of 4.3 percent in February compared to the decline of 4.6 percent (revised) in the previous month, as the growth of National Government deposits continued to slow down.
Meanwhile, net foreign assets (NFA) decreased further by 1.7 percent y-o-y in February following a decline of 0.9 percent (revised) in January. The BSP’s NFA position increased by 3.4 percent, supported by steady foreign exchange inflows from overseas remittances, portfolio investments, and BPO receipts. However, the NFA of banks declined further as banks’ foreign liabilities continued to increase due in part to higher placements and deposits made by foreign banks with their local branches, while their foreign assets continued to contract due to the decline in their loan receivables.
The continued expansion in domestic liquidity reflects in part the impact of previous policy actions of the BSP to support the economy’s growth requirements. Going forward, the BSP will monitor monetary conditions closely to ensure that liquidity in the financial system remains supportive of economic activity while ensuring low and stable inflation.