Philippine liquidity growth hits 10.3%

Domestic liquidity in the Philippines rose 10.3 percent year on year to PHP 19.8 trillion in February, accelerating from January’s 8.6 percent pace as money circulating in the economy expanded on the back of stronger domestic claims, especially government borrowing, according to preliminary data released by the Bangko Sentral ng Pilipinas on March 31.

After seasonal adjustment, M3 — the broad measure of money supply — rose 1.2 percent month on month in February, indicating that liquidity also increased from January levels on a short-term basis.

M3 includes currency in circulation, bank deposits, and other financial assets that can be readily converted into cash, making it a closely watched gauge of how much money is moving through the banking system and the wider economy.

The BSP said claims on the domestic sector, which covers private and government entities, grew 11.0 percent year on year in February, faster than 10.0 percent in January, pointing to stronger credit activity as the main driver of money supply growth.

Within that, claims on the private sector rose 10.6 percent in February, unchanged from January, supported by continued bank lending to non-financial private corporations and households.

Net claims on the central government increased 12.4 percent in February, faster than January’s 8.9 percent growth, which the BSP said was driven mainly by higher government borrowings.

Net foreign assets in peso terms rose 7.4 percent year on year in February, slower than the 10.2 percent increase in January, as foreign asset growth moderated even though BSP and banking-sector positions still improved.

The central bank’s own net foreign assets increased 4.1 percent, while banks’ net foreign assets rose primarily because of lower foreign currency-denominated bills payable.

The BSP said it will continue to ensure that domestic liquidity conditions remain consistent with its price and financial stability objectives.