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Growth in KB Lending Picks Up in August

10.15.2004

Loans outstanding of commercial banks (KBs) grew by 5.5 percent year-on-year to P1.5 trillion as of end-August 2004.  The August growth in KB lending represents an improvement from the 3.6 percent annual rise posted in the previous month and the 3.8 percent recorded in August 2003. This also marks the fastest increase in KB lending since April 2002. On a month-on-month basis, total KB loans rose by 1.4 percent during the period, a turnaround from the 0.7 percent contraction in July. 

In terms of sectoral contribution, the manufacturing sector, which accounted for more than a quarter of total loans, registered the largest contribution at 3.9 percentage points to the 5.5 percent growth in bank lending. Loans to the manufacturing sector rose by 15.6 percent as of end-August, a marked acceleration from the 6.4 percent rise a month ago and a reversal of the 2.0 percent decline during the same period a year ago. The following sectors also contributed to the increase in KB lending: agriculture, fisheries and forestry (0.6 percentage point), wholesale and retail trade (0.5 percentage point), electricity, gas and water (0.5 percentage point), financial institution, real estate and business services (0.2 percentage point) and community, social and personal services (0.2 percentage point).  Meanwhile, the decline in lending to sectors such as mining and quarrying, construction and transportation, communication and storage limited the overall expansion in KB loans. 

The pick-up in KB lending growth came against a backdrop of some improvements in real sector economic activity and expectations that the domestic economy will remain on a steady growth path for the remainder of the year. Going forward, monetary authorities will continue to monitor and assess the evolving real sector activities at the same time, guarding against the possible persistence of price pressures. This will provide support to the improvement in credit demand and sustainability of economic growth.

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