The central bank said domestic liquidity or M3 increased by 9.8 percent year-on-year in January to P15.3 trillion, more than the 7.3 percent growth recorded in December.

The higher M3, also known as money supply, was due to the significant growth in bank lending in January and higher net claims on the central government on account of sustained National Government (NG) borrowings, according to the Bangko Sentral ng Pilipinas (BSP).

On a month-on-month seasonally-adjusted basis, M3 rose by 2.8 percent, said the BSP on Monday, Feb. 28.

Domestic claims increased by 9.6 percent year-on-year in January from 7.7 percent in December because of the “sustained expansion in net claims on the central government as well as the continued improvement in bank lending to the private sector.”

The BSP said net claims on the central government increased by 19.6 percent but this was a slower growth compared to 22.1 percent in December due to NG borrowings.

“Meanwhile, claims on the private sector increased by 6.1 percent in January from 2.8 percent (revised) in December as bank lending to non-financial private corporations accelerated while credit to households reverted to positive growth for the first time since December 2020,” noted the BSP.

Meantime, the money supply’s net foreign assets or NFA grew by 6.2 percent in January compared to 6.5 percent in December. “The BSP’s NFA position grew during the month even as the country’s gross international reserves declined from a year ago,” said the BSP.

It added that banks’ NFA growth “moderated” as banks’ foreign assets grew at a slower pace on account of lower deposits maintained with nonresident banks.

“In keeping with its price and financial stability objectives, the BSP will continue to ensure appropriate policy support for the economic recovery, even as it looks to the eventual normalization of its extraordinary liquidity measures when conditions warrant,” said the BSP.

Since March 2020, when the global pandemic was declared, the BSP has provided liquidity to ease market worries and provide the financial system the necessary funding it needs amid lockdowns.

As of end-2021, the central bank’s liquidity-enhancing measures amounted to P2.3 trillion, equivalent to about 12.03 percent of gross domestic product (GDP).

The BSP’s accommodative monetary policy stance, in addition to regulatory relief measures to banks and non-banks, as well as the extra bank funds in the financial system, has helped the economy to hurdle four quarters of GDP contraction.

Last year, GDP grew by 5.6 percent, reversing the 9.6 percent GDP decline in 2020. The 2021 GDP also exceeded the government’s projection of five percent to 5.5 percent.