Loans outstanding of commercial banks (KBs) rose steadily by 0.9 percent, year-on-year to reach P1.5 trillion as of end-April 2004. The growth in bank lending in April was a slight improvement over the 0.8 percent year-on-year increase registered in March 2004.
KB loans to the agriculture, fisheries and forestry sector posted a marked increase of 12.6 percent in April, which is about twice the 6.4 percent annual growth registered in the previous month. The growth in bank lending to the other sectors also contributed to the sustained rise in the outstanding loans of commercial banks such as those granted to the transportation, storage and communication sector, which grew by 7.3 percent; community, social and personal services sector, 7.1 percent; electricity, gas and water sector, 4.8 percent; as well as the wholesale, retail and trade sector, 2.5 percent. Moreover, bank lending to the manufacturing sector posted a positive—though still modest—0.2 percent annual growth after four months of continued decline. Altogether, borrowings by these sectors accounted for 71.6 percent of the total KB loans as of end-April 2004.
In the near term, there are favorable prospects for sustained growth in bank lending given the strong performance of the economy in the first quarter, which grew significantly by 6.4 percent in terms of real GDP. Credit activity could strengthen further in the months ahead as consumption spending continued to be robust and investments started to pick up. Moreover, advanced indicators of demand suggest continuing improvements in economic activity, such as the sustained rise in sales of consumer durables and energy sales. In particular, passenger car sales grew at a hefty 119.1 percent year-on-year, reflecting seven straight months of double-digit growth rates. Similarly, energy sales by Meralco rose by 7.8 percent in March 2004 from the level a year ago. Merchandise exports for the period January-April posted a growth of 6.9 percent over a year-ago level. In addition, merchandise imports rose by 6.4 percent in the first quarter from the previous year’s level.
Moving forward, monetary policy will continue to emphasize caution amidst the emerging risks on the inflation outlook to help provide a supportive environment for credit activity towards sustained economic growth.