Loans outstanding of commercial banks (KBs) rose by 1.7 percent, year-on-year to reach almost P1.5 trillion as of end-May 2004. The growth in bank lending in May was a slight improvement over the 0.9 percent year-on-year increase registered in April 2004. On a monthly basis, KB loans increased by 1.0 percent in May.
KB loans to the agriculture, fisheries and forestry sector continued its strong growth from the previous month, rising by 12.5 percent year-on-year in May, while loans to the manufacturing sector posted a moderate 2 percent growth. In terms of contribution to the expansion in bank lending, community, social, and personal services, accounted for the bulk at 1.6 percentage points, followed by wholesale and retail trade at 1.1 percentage points. Agriculture, fisheries, and forestry contributed 0.7 percentage point, while manufacturing as well as transportation, storage, and communication made contributions to the expansion in loan growth of 0.45 percentage point and 0.58 percentage point, respectively. Meanwhile, the decline in bank lending to other sectors limited the overall rise in bank lending during the month.
Expansion in the economy continues to be robust, as growth remains to be driven by non-credit intensive sectors such as agriculture and services. Nevertheless, the observed pattern of moderate credit demand and investment growth implies that the stance of monetary policy should continue to support the real sector by maintaining adequate stimulus to credit activity. Therefore, in the months ahead, monetary authorities will continue to monitor developments in the real and monetary sectors to ensure that credit conditions remain supportive of the economy’s growth path without undermining price stability over the medium-term.