Domestic liquidity or M3 rose by 9.9 percent to reach P1.3 trillion at end-August 2000 from its year-ago level.
The annual expansion in M3 was reflected in higher credit extended by the Deposit Money Banks (DMBs) at end-August 2000, which rose by 8.5 percent. Higher credit to both the public and private sectors led to the expansion in bank credits. Public and private sector credits grew by 16.1 percent and 6.4 percent, respectively.
Meanwhile, total loans outstanding of commercial banks (a primary component of DMBs’ Net Domestic Credits), at P1.4 Trillion at end-August 2000, continued to grow by 4.4 percent year-on-year. Loans to the manufacturing sector grew for the tenth consecutive month since November 1999, posting an annual growth of 11.3 percent at end-August.
The expansion in bank lending in August was due mainly to increased demand for loans from the following sectors: mining and quarrying, electricity, gas and water, manufacturing, transportation storage and communication sector as well as financial institutions, real estate and business services (FIREBS) sector. The bulk of these loans was extended to the manufacturing and FIREBS sectors, along with the wholesale and retail trade sector, as they accounted for a combined 69 percent of the total loans outstanding at end-August.
The month-on-month rise in DMBs’ domestic credit, along with favorable advance indicators of aggregate demand and supply provide optimism for the continued recovery of the economy. Real GDP grew stronger than expected in the second quarter to yield a first-semester growth rate of 3.9 percent. For this year, real GDP is expected to grow within the range of 4.0-5.0 percent, from 3.2 percent in 1999. Meanwhile, the continued growth in commercial bank lending, particularly in the manufacturing sector, provides firm evidence of broad-based, and thus, sustainable economic growth.
On the supply side, manufacturing output, in terms of volume and value, has remained strong. The average value of production index (VPI) during the period January-July 2000 grew by 22.3 percent year-on-year as against 0.4 percent during the same period last year. Similarly, the average volume of production (VOPI) during the period January-July 2000 expanded by 13.3 percent, after declining by 3.0 percent in the same period last year.
On the demand side, consumer confidence has been on the uptrend. Power sales of Meralco rose by 8.2 percent in the first eight months of 2000 compared to a decline of 0.6 percent in the same period last year. Likewise, car sales have been sustained, showing a rise of 13.7 percent for the period January-September 2000 relative to a decrease of 25.6 percent in the same period last year.
Monetary policy will remain supportive of economic growth objectives while keeping inflationary pressures at bay. In this connection, the Bangko Sentral will continue to monitor vigilantly the developments in both the domestic economy and the external sector to guide the monetary authorities in determining the appropriate monetary policy stance.