Bank lending activity continued to improve in January 2003, with the total volume of outstanding commercial banks’ (KBs) loans rising by 4.4 percent year-on-year to reach P1.4 trillion from the 2.4 percent growth in the previous month. Commercial bank lending has been growing steadily for the fifth straight month since September 2002. The sustained improvement in commercial bank lending was led primarily by the growth in the following sectors: agriculture, fisheries and forestry (27.7 percent); community, social and personal services (14.5 percent); and manufacturing (7.7 percent) which altogether comprise 45.3 percent of total outstanding loans of commercial banks. The upturn in bank lending to manufacturing sector in January also marked the second consecutive month of increase after 17 months of year-on-year contractions.
The continued growth in bank lending has been accompanied by the improvement in the asset quality of commercial banks as the ratio of non-performing loans (NPL) to total loans outstanding eased further to 14.95 percent as of December 2002 from 16.10 percent in the previous month. The implementation of the Special Purpose Vehicle (SPV) Act of 2002 on 10 January 2003 is expected to further invigorate bank lending activity as it would facilitate the speedier disposal of the non-performing assets of the banking system. In addition, the robust growth in domestic demand in the fourth quarter on the strength of consumption spending is also expected to propel further the growth in bank lending going forward.
In the light of these developments, monetary policy will continue to ensure that the stance of monetary policy remains fully consistent with a supportive macroeconomic environment—one that provides sufficient credit and liquidity for sustained economic growth—while keeping a close watch against any evidence of inflationary pressures that could pose a risk to achieving a low and stable inflation.