Commercial bank lending continued to grow in July by 2.2 percent from the level a year ago to reach P1.43 trillion as of end-July 2001. This growth was subdued in comparison to the 4.0 percent year-on-year increase recorded in June.
By sector, bank lending to the wholesale and retail trade; community, social and personal services; electricity, gas and water; agriculture, fisheries and forestry; and mining and quarrying sectors rose in July from their levels a year ago. This expansion, however, was pared down by the decline in bank lending to the manufacturing; construction; transportation, storage and communication; and financial institutions, real estate and business services (FIREBS) sectors. Of the total loans outstanding of commercial banks, P758.1 billion or more than half were channeled to the manufacturing and FIREBS sectors.
The pace of growth in commercial banks’ lending activities reflected the broad movement of domestic liquidity. The year-on-year growth in domestic liquidity or M3 moderated to 11.9 percent in July from 13.0 percent in June. Meanwhile, net domestic credits grew steadily year-on-year by 5.2 percent in July from 5.1 percent in the previous month.
Leading indicators of demand and supply continue to show improving economic activity in the months ahead. The year-on-year growth of the value of production index (VAPI) grew by 11.4 percent (1994-based). Average capacity utilization of manufacturing firms rose slightly to 79.7 percent (1994-based) in July, from 77.7 percent reported in June. In addition, car sales also increased by 4.2 percent from the level a year ago. Meanwhile, the unemployment rate dropped to 10.1 percent in July from 11.2 percent a year ago. These trends suggest that there is sound basis for internally generated growth, which is important in the face of a weak external environment due to the expected downturn in the U.S. economy and other global uncertainties.
The authorities will continue to monitor closely economic and financial developments in order to determine the appropriate monetary setting that would be supportive of the Government’s growth and inflation objectives.