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Bank Lending Continues to Grow in July

09.30.2008

Outstanding loans of universal and commercial banks including reverse repurchase agreements (RRPs) continued to register strong growth in July at 23.9 percent, a slight deceleration from the previous month’s growth of 24.2 percent.  Net of RRPs, loans outstanding continued to accelerate at 18.5 percent in July from 18.1 percent in June. BSP Governor Amando M. Tetangco, Jr. noted that these developments indicate that liquidity in the financial system remains ample, providing the financial resources necessary for sustaining economic growth.

Preliminary data for July was obtained from the new system of bank reporting under the Financial Reporting Package (FRP) which adopts the detailed classification of the 1994 Philippine Standard Industrial Classification (PSIC) for international comparability.  The FRP classified lending by production activities (covering 16 economic sectors) and by household consumption purposes (with three economic categories).

Lending to production sectors, which has been accelerating since May, grew by 16.4 percent in July. All sectors recorded expansions in lending, with the exception of fishing, mining and quarrying, and financial intermediation which posted contractions.  The expansion in lending was led by the following sectors: agriculture (25.8 percent), electricity, gas, and water (58.9 percent), wholesale and retail trade (21.7 percent), transport, communication, and storage (70.1 percent), and real estate, renting and business services (14.4 percent).  Meanwhile, lending for household consumption decelerated to 18.0 percent from the previous month’s 22.0 percent as auto loans registered a decline, in contrast to the previous month’s double-digit growth following the continued rise in fuel prices.  This was partially offset by the growth in credit card receivables which continued to grow strongly at 27.9 percent.

BSP Governor Tetangco noted that bank lending is an important economic indicator because credit conditions reflect confidence in the economy, which in turn, is a key ingredient for the effective functioning of the markets.

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