Because banks have lent more in April to non-financial private companies and households and the government borrowed much for pandemic response-- therefore more asset claims for the system-- domestic liquidity expanded on a year-on-year by 7.3 percent in April reaching P15.3 trillion, but this was slight drop from March's 7.7 percent.
On a year on year basis, domestic liquidity expanded by 7.3 percent in April to P15.3 trillion, after expanding by 7.7 percent (revised) a month ago.
What this all means is we have more assets now that can be easily liquified into cash, if the need arises, than last year when the country was in varying stages of lockdowns and the economy was at a virtual halt.
Liquidity (or M3 in the jargon of Bangko Sentral) refers to the ease with which an asset, or security, can be converted into ready cash without affecting its market price. Cash is the most liquid of assets, while tangible items are less liquid. The two main types of liquidity include market liquidity and accounting liquidity.
Domestic claims rose by 9 percent year-on-year in April from 8.1 percent (revised) in March due to the improvement in bank lending to the private sector and the expansion in net claims on the central government.
Claims on the private sector grew by 6.5 percent in April from 5.6 percent in March with increased bank lending to non-financial private corporations and households. Meanwhile, net claims on the central government rose by 17.6 percent in April from 16.3 percent (revised) in March owing to the sustained borrowings by the National Government for pandemic response.
Net foreign assets (NFA) in peso terms increased by 5.2 percent in April from 8.2 percent (revised) in March. The slower expansion in the BSP’s NFA position reflected the decline in gross international reserves relative to the same period a year ago.
Meanwhile, the NFA of banks continued to expand, albeit at a slower pace, on account of higher investments in marketable debt securities as well as loans and receivables with nonresident banks.
The continued expansion in domestic liquidity indicates that liquidity remains sufficient to sustain the economy on a firm recovery path. A strong rebound in economic activity has also allowed the BSP to gradually withdraw its extraordinary liquidity intervention. Going forward, the BSP stands ready to undertake further measures as necessary to ensure that liquidity conditions stay in line with the BSP's price and financial stability objectives.
Tags: #M3ordomesticliquidity, #assetsthatcanbeliquidatedtocash, #money