DOMESTIC liquidity or M3 grew 6 percent in February 2023, according to the latest data released by the Bangko Sentral ng Pilipinas (BSP).
The data showed M3 reached P16.1 trillion in February 2023, higher than the P15.17 trillion in February 2022.
The BSP said this was also 0.6 percent higher than the P15.99 trillion recorded in January 2023.
“M3 may also be derived as Net Foreign Assets (plus) Domestic Claims, net of Liabilities excluded from broad money and transferable and other deposits in foreign currency (FCDs-Residents),” BSP explained.
However, Rizal Commercial Banking Corporation (RCBC) Chief Economist Michael Ricafort said the M3 growth was among the slowest pace in nearly two years or since July 2021, and among the slowest in a decade since August 2012.
“(This was) amid moves by monetary authorities in recent months to siphon off some of the excess pesos/liquidity from the financial system to help stabilize the peso exchange rate, import prices/costs, and overall inflation as well as inflation expectations,” Ricafort said.
Ricafort noted as well the reduction in pandemic-era “liquidity infusion measures” and higher inflation particularly in recent months.
He said that in the coming months, M3 growth could remain at mid single-digit levels as seen in recent months. However, this could be offset by increased weekly siphoning of excess liquidity through the BSP Term Deposit Facility (TDF) auctions.
Last week, the BSP lowered the volume offering for the TDF auction to P240 billion from P280 billion. Based on actual bids received last week, the total offer volume was reallocated between the 7-day and 14-day tenors at P140 billion from P180 billion and P100 billion, respectively.
Of the total bids received, the BSP accepted P240 billion. The BSP awarded P140 billion from P173.232 billion in bids in the 7-day tenor and accepted P100 billion from P126.306 billion in bids in the 14-day tenor.
“The results of the TDF auction reflected market participants’ high demand for both tenors following the BSP’s monetary policy meeting on 23 March and liquidity preferences in anticipation of the Holy Week holidays. Moving forward, the BSP’s monetary operations will remain guided by its assessment of the latest liquidity conditions and market developments,” BSP Deputy Governor Francisco Dakila Jr. said.
Meanwhile, BSP data showed domestic claims rose by 11.6 percent year-on-year in February from 11.4 percent (revised) in the previous month. Claims on the private sector grew by 9.9 percent in February from 10.7 percent (revised) in January due to the sustained expansion in bank lending to non-financial private corporations and households.
Net claims on the central government likewise increased by 17.4 percent in February from 16.5 percent in January owing to the borrowings by the National Government.
Meanwhile, net foreign assets (NFA) in peso terms decreased by 3.1 percent year-on-year in February, following the 1-percent contraction in January. The NFA of banks declined mainly on account of higher bills payable. Similarly, the BSP’s NFA position fell by 2.3 percent in February.