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Domestic Liquidity Growth Eases in January


Preliminary data show that domestic liquidity (M3) grew by 7.7 percent year-on-year in January to reach P7.5 trillion. This was slower than the 11.3-percent (revised) expansion recorded in December 2014. On a month-on-month seasonally-adjusted basis, M3 increased by 1.4 percent.

Money supply continued to increase due largely to sustained demand for credit. Domestic claims grew by 10.8 percent in January from 17.8 percent (revised) in the previous month as credits to the private sector expanded at a slower pace. The bulk of bank loans during the month was channeled to key production sectors such as real estate, renting, and business services, wholesale and retail trade, manufacturing, utilities, financial intermediation, and transportation, storage, and communication. Meanwhile, public sector credit contracted by 2.2 percent in January after growing by 19.4 percent (revised) a month earlier, as the deposits of the National Government (NG) increased significantly due mainly to the proceeds from the auction of government debt papers as well as revenue collections of various agencies.

Net foreign assets (NFA) in peso terms rose at a faster pace of 5.6 percent in January from 5.0 percent (revised) in the previous month. The NFA of banks increased as banks’ foreign assets expanded, while their foreign liabilities contracted. Banks’ foreign assets increased due mainly to the growth in their foreign loans and receivables, investments in marketable debt securities, and deposits with other banks, while banks’ foreign liabilities decreased on account of lower deposits and placements made by foreign banks with their local branches and other banks. Meanwhile, the BSP’s NFA position contracted at a slower pace during the month, reflecting the increase in gross international reserves from their level a year ago.

Domestic liquidity has continued to grow at a moderate pace during the month due in part to the increase in placements of trust entities in the BSP’s special deposit account (SDA) facility relative to a year ago. The M3 growth in January 2015 also reflects statistical base effects associated with the significant increase in domestic liquidity a year ago of  38.0 percent, following the operational adjustments involving access of trust entities to the BSP SDA facility, which were completed in November 2013.

Going forward, the BSP will continue to keep a close eye on monetary dynamics and remain prepared to take appropriate measures if needed to ensure that liquidity stays sufficient to support the growth requirements of the economy.

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