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 .