Loans outstanding of commercial banks’ (KB’s) recovered in November, rising by 4.3 percent year-on-year to reach P1.49 trillion following a minimal 0.8 percent year-on-year growth in the previous month and a 1.4 percent growth in the same month in 2002. The improved bank lending activity reflected increased business borrowings and other commercial activities ahead of the holiday season. The growth in bank lending to the manufacturing, community, social and personal services, and financial services sector, which account for a combined share of 68 percent of the outstanding loans, accelerated in November.
The strong growth in bank lending has been sustained by the increased flow of credits to the following sectors: community, social and personal services sector, by 16.1 percent; agriculture, fisheries and forestry sector, 8.1 percent; financial institutions, real estate and business services, 3.4 percent; construction, 3.2 percent; manufacturing, 2.5 percent; transportation, storage and communication sector, 2.2 percent. Altogether, these most productive sectors in the economy accounted for about 81 percent of the total outstanding KB loans in November 2003. The demand for loans by the manufacturing sector, which accounts for roughly one-fourth of the outstanding loans, grew by 2.5 percent year-on-year compared to the 1.0 percent in the previous months and the 7.1 percent contraction in November 2002.
The recovery in bank lending was also accompanied by the acceleration in the growth of domestic liquidity, which rose by 4.6 percent as of end-November 2003, from only 2.5 percent in October. The increased demand for loans was supported by the improved activity in the real sector as reflected in the movements of selected leading indicators. For example, results of the latest survey on Monthly Integrated Survey of Selected Industries (MISSI) by the National Statistics Office (NSO) showed that average capacity utilization of key manufacturing firms rose to 78.9 percent in October 2003 compared to 77.7 percent in the previous month. In addition, registered energy sales by Meralco accelerated by 3.6 percent year-on-year in November 2003, following two consecutive months of very modest increases. Sales of consumer durables, particularly, passenger car sustained double-digit growth rate of 53.3 percent year-on-year in November from 81.9 percent in the previous month, an indication of continued strength in consumption spending.
Going forward, monetary policy will continue to provide a supportive environment that will ensure sufficient liquidity to finance the economy’s requirements for sustained economic growth. At the same time, however, the BSP will continue to be vigilant against any possible resurgence of inflationary pressures that could pose a risk to achieving low and stable inflation.