Outstanding loans by commercial banks, thrift banks and rural banks grew at a faster pace of 9.9 percent year-on-year compared to the 7.5 percent growth in the previous month. Total loans outstanding were close to the P2 trillion mark, at P1.979 trillion as of end-March 2007. The growth of bank lending for this month was significantly higher than the 1.3 percent expansion registered in the comparable month a year ago. On a month-on-month basis, seasonally adjusted data posted a positive growth of 0.6 percent, a reversal of the 0.7 percent decline registered in the previous month.
Year-on-year growth in lending continued to be driven by loans to financial institutions, real estate and business services (17.5 percent) and community, social and personal services (16.9 percent). Lending to mining and quarrying also continued to post strong growth at 24.2 percent. Similarly, lending to the wholesale and retail trade and transportation, storage and communication sectors grew at a faster clip of 10.8 percent and 11.1 percent, respectively. Lending to the electricity, gas and water sector reverted to positive territory from the decline recorded in the previous month, while lending to agriculture slowed down slightly to 3.4 percent from 4.7 percent in the previous month. Meanwhile, outstanding loans to manufacturing and construction declined by 3.2 percent and 1.6 percent, respectively.
Credit is an important leading indicator of the growth in the economy, since higher credit could foreshadow, among other things, an increase in investment. Credit is also an important channel of monetary policy. For these reasons, the BSP closely monitors its trend and underlying forces to ensure that the growth of credit is consistent with price stability, one that is supportive of sustainable and balanced growth.