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Domestic Liquidity Up By 11.8 Percent In February While Bank Lending Improves

05.02.2000

Domestic liquidity, or M3,  reached  P1.255 trillion as of  end-February 2000.   At this level, M3 grew by   11.8 percent from the level registered a year ago, indicating   the continued growth in demand for money   as well as   the   sufficient level of liquidity, which is supportive of the economy’s growth objective for the year   of an average of 5.0 percent.

The year-on-year growth of Net Domestic Credit (NDC) of Deposit Money Banks (DMBs) remained positive at  1.43 percent in February 2000.   This was a slight deceleration from the 1.78 percent growth registered in the previous month.   By sector, net domestic credits to the private sector and the public sector   increased by 1.27 percent and 2.0 percent, respectively,  in February 2000 from their  levels a year ago.     

   Loans outstanding of commercial banks rose by 1.1 percent year-on-year to reach P1.33 trillion as of end-February 2000.  This WNS an improvement from the negative growth of  0.2 percent registered in the previous month.    In particular, loans to the manufacturing sector registered  a  significant year-on-year growth of   12.6  percent in February.  This also marked the fourth consecutive month of positive loan growth in  the  manufacturing sector.   On a monthly basis, bank lending in February 2000 grew by 0.8 percent, a turn-around from the 2.2 percent decline recorded in  the previous  month.    

The  improvement in   bank lending in February 2000 was driven  mainly by increased availment of credit   by the manufacturing, utilities (electricity, gas and water) and the financial institutions, real estate and business services (FIREBS) sectors, which   offset the  decline in  bank credits to the other  industry groups. In terms of distribution, banks’ loanable funds continued to be channeled to the productive sectors of the economy. In particular, the manufacturing, wholesale and retail trade as well as the FIREBS sectors continued to  account for the bulk or 68.5 percent of banks’ total loans outstanding in  February  2000.  

The continued  emphasis on implementing structural reform measures and promoting greater macroeconomic stability will help sustain the improvement in domestic credit that is needed to encourage new investments and  support economic growth.    Improved economic  stability  and continued  reforms   will also   bolster  business  confidence.    For its part, the Bangko Sentral will continue to provide a policy environment aimed at promoting  credit growth  while    ensuring  an  appropriate level of domestic liquidity    consistent  with    maintaining price stability    along   the   target  growth path  for   the economy.    At the same time,   monetary policy will continue to be guided by movements of key economic indicators and external developments .

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