There has been a perceptible increase in bank lending for several months now ending in June, bolstering the prospects for a sustained expansion of the country’s productive capacity.
Total loans outstanding of commercial banks grew by 4.7 percent year-on-year from 5.6 percent in May to P1.4 trillion as of June 2000. In particular, bank lending to the manufacturing sector continued its positive year-on-year growth for the eighth consecutive month since November 1999, advancing by 8.9 percent in June.
The year-on-year growth of bank lending in June was due mainly to increased appetite for credit by major productive sectors of the economy. Aside from manufacturing, the other main beneficiaries of bank lending are the financial institutions, real estate and business services sector or FIREBS, together with the wholesale and retail trade sector. Lending to these sectors constitutes 68.9 percent of total loans outstanding as of June 2000.
The country’s leading indicators of output for the first six months of the year 2000 provide grounds for optimism for steady and broad-based economic growth.
Total exports, particularly electronics and components, grew year-on-year by 19.4 percent in June, the highest so far since October 1999. The sustained increase in the demand for consumer durables, notably cars and household appliances, indicates a revival of consumer confidence.
The banking system is very liquid. Domestic liquidity or M3 grew by 11.3 percent in June 2000 from its year-ago level to reach P1.3 trillion. The rise in M3 growth can be traced to increased bank credits and partly to the expansion of reserve money that has been made possible by the accommodative monetary policy stance of the Bangko Sentral, given the low inflation environment.
(M3 is a measure of money supply that includes money held by individuals, institutional investors and banks).