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March Domestic Liquidity and Credit Show Renewed Optimism in the Economy

05.05.1999

"Recent figures on domestic liquidity and net domestic credit continue to provide encouraging signs of renewed optimism in the country’s economic prospects. While domestic liquidity or m3 annual growth in March 1999 at 7.1 percent, was slightly lower than the previous month’s 7.7 percent, month-on-month growth actually accelerated to 0.86 percent in March from a 0.5 percent contraction in February."

"Meanwhile, growth in Net Domestic Credit (NDC) of deposit money banks, both on an annual and on a month-on-month bases, registered a slightly higher contraction in March of 0.72 percent and 1.16 percent, respectively, from the previous month’s contraction of 0.16 percent and 0.03 percent, respectively. Nevertheless, credit to the private sector, which consist the bulk of total NDC (79 percent in March), registered a lower contraction of 4.17 percent for the said month compared to 5.37 percent in February. Similarly, loans outstanding of commercial banks showed a lower decline of 4.3 percent in March compared to the previous month’s contraction of 5.8 percent."

"These welcome developments indicate the greater willingness of banks to accommodate higher demand for credits by the public in general. With the continued decline in the inflation rate to 8.0 percent in April from 8.7 percent in March, lower interest rate of 10.05 percent for the latest 91-day t-bill rate and stable exchange rate, investments are expected to pick up and production will likely show greater expansion in 1999 compared to 1998. These are all consistent with the real GNP projection of 1.5-3.5 percent in 1999 with inflation of 8.0-9.0 percent (1994=100)."

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