Loans outstanding of commercial banks (KBs) registered a modest 0.8 percent year-on-year growth to reach almost P1.5 trillion as of end-March 2004, reflecting an improvement from the 1.5 percent contraction in KB loans in the previous month. Compared to the same month a year ago, however, the annual increase in KB loans in March 2004 was slower than the 3.2 percent growth posted in March 2003. On a monthly basis, KB loans increased by 1.8 percent in March 2004.
Continued expansion in bank lending was observed in the following sectors, namely: mining and quarrying, 86.2 percent; construction, 18.1 percent; community, social and personal services, 10.7 percent; transportation, storage and communication, 8.8 percent; and agriculture, fisheries and forestry, 6.4 percent. Taken together, these sectors accounted for 30.1 percent of total loans outstanding as of end-March 2004. However, the increase in bank lending to these sectors was offset partly by fewer loans to sectors such as wholesale and retail trade sector, for which loans fell by 5.8 percent. Bank lending to the manufacturing, financial institutions, real estate and business services and electricity, gas and water sectors likewise declined during the month by 4.3 percent, 2.4 percent and 0.9 percent, respectively.
The minimal increase in bank lending in March occurred against a backdrop of improving real sector activity. For example, the value of production index (VAPI) in the manufacturing sector maintained its uptrend, rising by 4.8 percent in February 2004. Similarly, merchandise exports data from the National Statistics Office (NSO) showed that exports grew by 7.1 percent in March 2004. Other demand-side indicators also displayed improvements as passenger car sales continued to register double-digit growth of 86.3 percent in March 2004 while registered energy sales by Meralco rose by 6.2 percent in February 2004. Such developments suggest an improvement in credit demand in the months ahead.
Going forward, given a generally manageable inflation outlook over the policy horizon, the monetary policy stance of the BSP will continue to ensure that the general macroeconomic environment remains conducive to credit demand and investment activity. Monetary authorities will continue to monitor closely the developments in bank lending activities and ensure that these are appropriately considered, together with other factors bearing on the inflation outlook, in the BSP’s regular assessment of the stance of monetary policy.