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Domestic Liquidity Growth Rises in February

03.31.2015

Preliminary data show that domestic liquidity (M3) grew by 8.5 percent year-on-year in February to reach P7.5 trillion. This was faster than the 7.7-percent expansion recorded in January. 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 10.0 percent in February from 10.8 percent in January as credits to the private sector expanded at a broadly similar pace relative to the previous month. The bulk of bank loans during the month was channeled to key production sectors such as manufacturing, wholesale and retail trade, real estate, renting, and business services, utilities, and financial intermediation. Meanwhile, net public sector credit contracted by    4.5 percent in February after declining by 2.2 percent a month earlier, as the deposits of the National Government (NG) continued to increase due mainly to revenue collections of various agencies.

Net foreign assets (NFA) in peso terms rose at a faster pace of 7.3 percent in February from 5.6 percent 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 placements made by foreign banks with their local branches. Meanwhile, the BSP’s NFA position contracted at a slower pace in February, reflecting the weaker appreciation of the peso relative to the previous month.

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 February 2015 also reflects statistical base effects associated with the significant increase in domestic liquidity a year ago of  36.6 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 monitor monetary conditions and remain prepared to take appropriate measures if necessary to ensure that domestic liquidity stays adequate to support a non-inflationary growth trajectory.

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