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Domestic Liquidity Expands Further in April


Preliminary data show that domestic liquidity (M3) grew by 9.0 percent year-on-year in April 2015 to reach P7.6 trillion. This was faster than the 8.7-percent expansion (revised) recorded in March. On a month-on-month seasonally-adjusted basis, M3 increased by 0.9 percent.

Money supply continued to increase due largely to sustained demand for credit. Domestic claims grew by 9.3 percent in April from 10.4 percent in March as credits to the private sector expanded at a slightly slower pace relative to the previous month. The bulk of bank loans during the month was channeled to key production sectors such as manufacturing, real estate, renting, and business services, wholesale and retail trade, utilities, and financial intermediation. Meanwhile, net public sector credit contracted by 7.9 percent in April after declining by 8.3 percent (revised) a month earlier.

Net foreign assets (NFA) in peso terms rose at a faster pace of 8.8 percent in April from 8.4 percent (revised) in the previous month. The BSP’s NFA position continued to expand during the month, after contracting since July 2014, on the back of robust foreign exchange inflows coming mainly from overseas Filipinos’ remittances and business process outsourcing receipts. The NFA of banks likewise increased as banks’ foreign assets expanded, while their foreign liabilities contracted. Banks’ foreign assets increased due mainly to the growth in their 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.

Domestic liquidity growth accelerated during the month due in part to the decline in the placements of trust entities in the BSP’s special deposit account (SDA) facility relative to the previous month. Nonetheless, the broadly slower pace of M3 expansion in April 2015 relative to a year ago reflects the gradual normalization of domestic liquidity growth after the operational adjustments involving access of trust entities to the BSP’s SDA facility were completed in November 2013.

The continued expansion in domestic liquidity during the month indicates that liquidity remains sufficient to sustain the economy’s growth momentum. Going forward, the BSP will closely monitor monetary conditions to ensure that liquidity dynamics stay consistent with the BSP’s price and financial stability objectives.

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