Money supply posts 10.3% growth to P3.89 trillion in March

MANILA, Philippines - Money supply posted a double-digit growth in March due to the strong growth of liquidity, resulting in a steady growth in net foreign assets (NFA) of the central bank and other depository corporations, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

BSP Governor M. Amando Tetangco Jr. said domestic liquidity or M3 posted a 10.3- percent growth to P3.894 trillion as of end-March from P3.53 trillion in the same period last year. The latest growth rate was compared to the 9.9-percent growth registered in February.

Tetangco pointed out that the amount of money supply in March at P55 billion was higher than the P3.839 trillion registered in February.

“The continued strong growth of domestic liquidity reflects, to some extent, the impact of the flow of global liquidity to liquidity-receiving countries like the Philippines,” he stressed.

M3 is the amount of money circulating in the domestic economy. At a time when the economy is booming and money supply is expanding rapidly, the central bank would normally step in to mop-up in order to ensure that inflation would not surge.

The BSP chief explained that the sustained expansion of liquidity was due mainly to the strong growth in the NFA of both the BSP and the banking system.

Data showed that the NFA expanded by 15 percent to P2.036 trillion as of end-March from P1.786 trillion in the same period last year while that of other depository corporations surged by 39.8 percent to P457.77 billion from P326.83 billion.

On the other hand, the central bank data showed that the net domestic assets (NDA) increased by 2.4 percent to P2.531 trillion from P2.47 trillion.

The BSP attributed the increase to the double-digit growth of 10.4 percent in credit extended to the public sector amounting to P1.054 trillion from P955.79 billion.

Credit to the private sector also continued to increase by 8.3 percent to P2.643 trillion in March from P2.44 trillion in the same month last year.

Liquidity growth is one of the important vehicles considered in determining the central bank’s monetary policy. The BSP’s Monetary Board has kept its key policy rates steady at record lows after reducing overnight borrowing and lending rates by 200 basis points since December 2008 until July last year.

It has since kept its overnight borrowing rate unchanged at a record low of four percent and the overnight lending rate is at six percent.