Loans outstanding of commercial banks (KBs) grew by 5.1 percent year-on-year to P1.543 trillion as of end-March 2005. However, the growth in March 2005 was a slight deceleration from the growth of 5.8 percent posted in the previous month. On a month-on-month basis, total KB loans rose by 1.2 percent in March, a slight improvement over the 0.9 percent month-on-month growth in February.
The continuing increase in bank lending to the manufacturing sector which comprises more than a quarter of commercial bank loans has contributed to the sustained growth in total KB loans. The 10.7 percent year-on-year expansion in KB lending to the manufacturing sector accounted for 2.6 percentage points to the 5.1 percent year-on-year loan growth. Other sectors, which benefited from the sustained rise in commercial bank lending were the agriculture, fisheries and forestry sector, which rose by 21.5 percent year-on-year; financial institutions, real estate and business services sector or FIREBS, 7.4 percent; as well as the community, social and personal services sector, 6.6 percent. Meanwhile, there was a marked decline in lending to the mining and quarrying sector but lending to this sector may see improvements in the coming months with the favorable decision of the Supreme Court, which allows foreign participation in mining activities.
Going forward, growth in KB lending is expected to strengthen further on the back of renewed investor confidence in the economy, spurred by the passage of the expanded VAT law and the recent improvements in the National Government’s fiscal position. At the same time, the BSP’s efforts to help clean up banks’ balance sheets will help encourage bank lending for productive purposes.