The BSP’s Depository Corporations Survey said month-on-month basis, M3 grew by 1.1 percent from January’s P2.30 trillion.

"Growth in liquidity continued to be driven by strong inflows of foreign exchange from overseas Filipino workers’ (OFW) remittances, direct and portfolio investments, which also contributed to the growth of BSP’s foreign assets," the BSP said.

Credits to the public sector continued to decline as a result of the improved fiscal performance, with net lending to the National Government declining by 15.6 percent in February.

On the other hand, credits to the private sector remained weak, posting a slight increase of 0.7 percent.

"The BSP continues to monitor the growth of domestic liquidity to ensure that it remains consistent with the BSP’s price stability objective. (At the same time), the BSP will continue to pursue its efforts to strengthen the banking system in order to ensure that credit activity proceeds at a pace in line with real sector activity," officials said.

The central bank’s Depository Corporations Survey which replaces the Monetary Survey as the basis for measuring domestic liquidity, features an expanded list of surveyed institutions that includes the BSP, commercial banks, thrift banks, rural banks, non-stock savings and loan associations and non-banks with quasibanking functions. The previously used MS included only data from the BSP and the commercial banks in its survey.

Domestic liquidity, which refers to the total value of money in circulation, demand deposits, peso savings and time deposits or quasi-money and deposit substitutes, helps check the inflation rate, especially if on the high side.

The moderate though steady growth in domestic liquidity has been accompanied by improvements in domestic demand.

In the meantime foreign reserves remain at comfortable levels. The gross international reserve target for 2006 is $ 21 billion, which has already been surpassed in February.

The GIR is seen as a leading indicator for the country’s ability to repay its maturing debts as well as its trade with the rest of the world.