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Domestic Liquidity Sustains Expansion in March

05.02.2017

Preliminary data show that domestic liquidity (M3) grew by 11.2 percent year-on-year to ₱9.5 trillion in March 2017, slower than the 12.6-percent expansion in the previous month. On a month-on-month seasonally-adjusted basis, M3 increased by 0.3 percent.

Demand for credit remains the principal driver of money supply growth. Domestic claims grew by 15.8 percent in March, broadly steady from 15.9 percent (revised) in February 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; manufacturing; wholesale and retail trade, repair of motor vehicles and motorcycles; electricity, gas, steam and airconditioning supply; financial and insurance activities; and information and communication. Meanwhile, net claims on the central government expanded by 14.0 percent during the month as a result of increased borrowings and 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 5.3 percent year-on-year in March from 7.2 percent in the previous month. Foreign exchange inflows coming from overseas Filipinos’ remittances and business process outsourcing receipts continued to be the main drivers 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 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 domestic liquidity closely to ensure that monetary conditions are conducive to maintaining price and financial stability.

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