Preliminary data show that domestic liquidity (M3) grew by 12.4 percent year-on-year to ₱9.4 trillion in January 2017, slightly lower than the 12.7-percent (revised) expansion in the previous month. On a month-on-month seasonally-adjusted basis, M3 increased by 1.6 percent.
Demand for credit remains the principal driver of money supply growth. Domestic claims grew by 15.9 percent in January from 17.0 percent (revised) in December due largely to sustained growth in credit to the private sector. Growth in bank loans remains strong on account of lending to key production sectors such as real estate activities; wholesale and retail trade, repair of motor vehicles and motorcycles; financial and insurance activities; electricity, gas, steam and airconditioning supply; and manufacturing. Meanwhile, net claims on the central government expanded by 19.2 percent during the month as a result of the continued withdrawal by the National Government (NG) of its deposits with the BSP as part of NG cash operations.
Net foreign assets (NFA) in peso terms grew by 8.7 percent year-on-year in January from 7.8 percent (revised) in the previous month. Foreign exchange inflows coming from overseas Filipinos’ remittances, business process outsourcing receipts, and portfolio investments were the main factors behind the increase in the BSP’s NFA position. Meanwhile, the NFA of banks expanded due mainly to the growth in banks’ foreign assets resulting from higher interbank loans, deposits with other banks, and investments in marketable debt securities.
The growth in M3 remains consistent with the BSP’s prevailing outlook for inflation and economic activity. Going forward, the BSP will continue to monitor monetary conditions closely to ensure that domestic liquidity stays adequate to support the BSP’s price and financial stability objectives.