Preliminary data on domestic liquidity (M3) indicate that year-on-year growth in M3 rose to 6.4 percent in April 2004 from 4.8 percent in the previous month. The stronger rise was traced to the increase in net foreign assets (NFA) of the monetary system and the improvement in net domestic credits to both the public and private sectors. However, the seasonally-adjusted M3 reflected a month-on-month increase of only 0.1 percent in April 2004, slightly lower than the 0.3 percent monthly growth in March 2004.
The net foreign assets of the monetary system rose by 23.8 percent in April, owing mainly to the increase in investments by banks and by the BSP in foreign currency-denominated securities, the rise in the level of time deposits, and the proceeds from the foreign borrowings by the national government. Meanwhile, credit activity continues to be fueled by public borrowings, which rose by 18.0 percent in April from 15.5 percent in the previous month. Growth in credits to the private sector was recorded at 2.1 percent in April, an improvement from the 0.4 percent rise in the previous month.
The continued improvement in domestic liquidity is consistent with the overall trend of improving economic activity. During the first quarter, the country’s Gross Domestic Product (GDP) grew by 6.4 percent, accelerating from the 4.8 percent growth recorded in the first quarter of 2003. This was driven mainly by robust personal consumption and investments, which grew year-on-year by 5.1 percent and 4.8 percent, respectively, during the period.
Going forward, the stance of monetary policy will continue to ensure an appropriate level of liquidity that is supportive of the government’s objective of sustained economic growth. Thus, the BSP will continue to closely monitor the evolving macroeconomic developments in order to mitigate potential threats to the inflation outlook in order to ensure sustainable economic growth.
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