The Bangko Sentral ng PIlipinas (BSP) yesterday said that demand for money continued to grow in April as domestic liquidity or M3 rose by 13.7 percent year-on-year.

While the growth rate was a slight deceleration from the 15.6 percent recorded in March 2009, it was markedly higher than the 0.9 percent expansion posted in the same month a year ago.

On a monthly basis, BSP said the expansion of seasonally adjusted M3 declined marginally by 0.5 percent in April from a growth of 0.4 percent in the previous month.

The continued growth of M3 indicates that there is ample liquidity in the financial system despite heightened global economic uncertainty and increasing downside risks to output growth.

The growth also indicates that there are funds available in the system which could be tapped for investment and other productive activities.

According to the BSP, the level of domestic liquidity is an important indicator of monetary conditions and future economic activity.

BSP said that it continues to watch liquidity conditions closely to ensure that the financing requirements of the economy are met and that the Philippine financial system is not adversely affected by the current credit squeeze in global financial markets.

BSP said the expansion in liquidity was fueled mainly by the continued rise in net foreign assets at 20.2 percent in April.

According to the central bank, this can be traced to the sustained growth in the net foreign assets of the BSP and of the banks at 19.8 percent and 22.5, percent respectively.

Net foreign assets rose as the BSP continued to build up its international reserves and as banks settled a significant portion of their foreign liabilities.

The growth in net domestic assets slowed down to 4.2 percent year-on-year in April from the previous month’s 9.7 percent.

Growth in credits extended to the private sector accelerated to 19 percent from 18 percent in the previous month.

On the other hand, growth in credits extended to the public sector slowed down to 11.3 percent from 12.2 percent.