Domestic liquidity rose by 7.6 percent year-on-year in March, based on data from the BSP’s Depository Corporations Survey (DCS). This was a deceleration from the 9.4 percent year-on-year increase registered in the previous month. On a month-on-month basis, M3 declined marginally by 0.5 percent in March following a slight increase of 1.1 percent in February.
Inflows of foreign exchange from overseas Filipino workers’ (OFW) remittances, and direct and portfolio investments, continue to be the main drivers of liquidity growth. These inflows have contributed to the expansion in the net foreign assets of the BSP. Meanwhile, improving fiscal performance (as reflected in increased National Government deposits with the BSP) has also led to a continued decline in lending to the public sector, as shown by the 21.1 percent drop in net credits to the NG. Meanwhile, credits to the private sector also declined by 3.1 percent following marginal increases in the past two months, reflecting the generally sluggish pace of bank lending.
The BSP continues to monitor the growth of domestic liquidity to ensure that it remains consistent with the BSP’s price stability objective. At the same time, the BSP will continue to pursue its efforts to strengthen the banking system in order to ensure that credit activity resumes at a pace in line with real sector activity.
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