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Domestic Liquidity Growth Accelerates in April

05.31.2016

Preliminary data show that domestic liquidity (M3) grew by 12.7 percent year-on-year in April to reach P8.6 trillion. This was faster than the 11.7-percent expansion recorded in March. On a month-on-month seasonally-adjusted basis, M3 increased by 1.7 percent.

Money supply continued to expand due largely to sustained demand for credit. Domestic claims grew by 18.4 percent in April from 15.4 percent (revised) in March as credits to the private sector increased at a faster pace relative to the previous month. The bulk of bank loans during the month was channeled to key production sectors such as real estate activities; electricity, gas, steam and airconditioning supply; wholesale and retail trade, and repair of motor vehicles and motorcycles; financial and insurance activities; and information and communication. Net claims on the central government also rose by          42.0 percent in April, faster than the 33.6-percent (revised) growth a month earlier.

Net foreign assets (NFA) in peso terms likewise grew by 8.0 percent in April from  5.8 percent (revised) in the previous month. The BSP’s NFA position continued to expand during the month on the back of robust foreign exchange inflows coming mainly from overseas Filipinos’ remittances and business process outsourcing receipts. Meanwhile, the NFA of banks decreased as banks’ foreign assets expanded at a slower pace relative to that of their foreign liabilities. Banks’ foreign assets increased due largely to the growth in their investments in marketable debt securities, while banks’ foreign liabilities grew mainly on account of higher deposits made by foreign banks and foreign residents.

The sustained expansion of M3 during the month indicates that money supply remains sufficient to support economic growth. Going forward, the BSP will continue to monitor monetary conditions closely to ensure that liquidity growth remains consistent with the BSP’s price and financial stability objectives.

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