Preliminary data show that domestic liquidity (M3) grew by 13.3 percent year-on-year to about ₱13.1 trillion in March. This was faster than the 10.9-percent expansion in February. On a month-on-month seasonally-adjusted basis, M3 increased by 2.4 percent.
Demand for credit remained the principal driver of money supply growth. Domestic claims grew by 11.9 percent in March from 10.3 percent in February due mainly to the sustained growth in credit to the private sector. Loans for production activities continued to be driven by lending to key sectors such as real estate activities; financial and insurance activities; wholesale and retail trade, repair of motor vehicles; electricity, gas, steam and air conditioning supply; and information and communication. Meanwhile, loans for household consumption eased due mainly to the slower growth in credit card and motor vehicle loans during the month. Net claims on the central government grew by 21.6 percent in March, faster than the 18.4-percent growth in the previous month, reflecting the increased borrowings by the National Government.
Net foreign assets (NFA) in peso terms expanded by 9.1 percent year-on-year in March, following the 9.6-percent growth in February. The BSP’s NFA position continued to expand, reflecting the increase in gross international reserves. The NFA of banks also increased, as growth in banks’ foreign assets rose on account of higher interbank loans and deposits with other banks.
Following the implementation of community quarantine protocols in March, the BSP deployed various measures to shore up domestic liquidity and support credit activity. These measures include: reducing the policy rate by a total of 125 basis points since February 2020; cutting reserve requirement ratios of universal and commercial banks and non-bank financial institutions with quasi-banking functions by 200 basis points; conducting asset purchases in the market (i.e., repurchase agreement with national government amounting to ₱300 billion, and purchases of government securities in the secondary market); allowing new loans to micro, small, and medium enterprises (MSMEs) to be counted as part of banks’ compliance with reserve requirements; and raising the single borrower’s limit for loans granted by banks and quasi-banks, among others.
Going forward, the BSP will continue to monitor domestic liquidity and credit dynamics in order to provide support amid significant disruptions to economic activity. The BSP reassures the public of its commitment and readiness to deploy its full range of instruments to ensure that liquidity and credit remain adequate to support domestic demand amid the ongoing health crisis.