M3 money supply April growth slows

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THE rise in money supply lost some steam in April in what the central bank described as reflective of its efforts to manage excess liquidity to keep inflation under control.

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Growth in domestic liquidity, or M3, in April was recorded at 32.1 percent, bringing the total amount of cash and cash-equivalent securities circulating within the economy to P6.9 trillion.

The pace of growth was slower compared with the revised 34.7 percent increase recorded in March, although the Bangko Sentral ng Pilipinas (BSP) said the rate of expansion was still “strong.”

Month-on-month, seasonally adjusted M3 in April was up 0.2 percent compared with the revised 1.1-percent growth recorded in the previous month.

“As in previous months, the strong M3 growth reading in April continued to reflect the broad decline in the SDA (special deposit account) placements of trust entities compared with their levels a year ago, in line with the BSP’s operational adjustments in the SDA facility,” the BSP said.

The SDA is a monetary facility employed by the BSP to manage excess liquidity in the financial system. The central bank said that with the recent policy measures to adjust the reserve requirement of banks, growth in domestic liquidity is expected to remain consistent with the current pace of activity in the real sector.

At its May 8 policy meeting, the Monetary Board decided to increase the reserve requirement for banks by another one percentage point to 20 percent effective May 30, to guard against risks that could arise from strong domestic liquidity.

The BSP data showed that domestic claims rose by 12.3 percent in April from a year earlier as bank lending accelerated further, while public sector credit grew at a slower pace of 1.5 percent as the deposits of the national government increased.

Net foreign assets (NFAs), or the net position of the BSP with regard to its transactions with non-residents, in peso terms, rose by 7.1 percent.

The central bank said its NFA position rose on the back of continued robust foreign exchange inflows coming mostly as overseas Filipinos’ remittances, business process outsourcing receipts, and portfolio investments.

Similarly, the NFA of banks also increased as banks’ foreign assets expanded at a faster pace relative to the increase in their foreign liabilities, the BSP said.

“Banks’ foreign assets expanded due mainly to growth in foreign loans and receivables, while banks’ foreign liabilities rose on account of higher deposits of foreign residents,” it added.

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