Domestic credits strengthened further in May 2000 with a stronger year-on-year increase of 8.3 percent compared to 6.6 percent in the previous month. Increased credits to both the public and private sectors spurred the growth in DMBs’ net domestic credits. In particular, year-on-year private sector credit growth was stronger at 5.7 percent in May compared to 3.3 percent in the previous month. This development is indicative of the stronger role played by the private sector as it takes over the reins of growth. In turn, this should provide a firmer basis for sustained economic growth.
At P1.5 trillion as of end-May 2000, total loans outstanding of commercial banks grew by 5.7 percent year-on-year from 5.1 percent in April. In particular, loans to the manufacturing sector posted its seventh month of sustained increase since November 1999 with a relatively strong year-on-year growth of 8.0 percent in May.
Increased bank lending in May was due mainly to the increased appetite for credit in the following key sectors: financial institutions, real estate and business services (FIREBS); electricity, gas and water; and manufacturing. The bulk of bank loans was extended to the manufacturing and (FIREBS) sectors, along with the wholesale and retail trade sector. These sectors accounted for a combined 68.9 percent of the total loans outstanding in May.
The continued strengthening of overall credit demand reinforces the prospects for a broad-based increase in economic activity in the near term. Available leading indicators point to the economy’s sustained rebound. The volume of production index (VOPI) grew by 4.9 percent in January-April 2000, following a 5.3 percent decline during the same period last year. The value of production (VPI) likewise rose by 17.3 percent for the same period compared to a decrease of 2.6 percent a year earlier. The continued rise in aggregate demand is also evident in the year-on-year increases in imports, power sales and car sales for the same period.
Domestic liquidity or M3 grew by 10.8 percent in May 2000 from its year-ago level to reach P1.3 trillion. This growth, however, was slower than the 15.2 percent year-on-year growth registered in April. The slowdown in M3 growth in May can be traced to the 5.2 percent decline in reserve money as placements by banks with the BSP’s reverse repurchase facility (RRP) increased.
The Bangko Sentral will maintain its steadfast commitment to its mandate to promote price stability. By preserving a stable macroeconomic environment, authorities hope to create the enabling environment that will ensure the sustainable and broad-based growth for the economy.