The volume of outstanding loans of commercial banks (KBs) grew steadily in February 2003 by 4.4 percent year-on-year to reach P1.46 trillion. At this level, bank lending rose for the fifth consecutive month since September 2002. The growth in KB loans in February 2003 also reflected the same year-on-year growth registered in January 2003 and a reversal of the 0.6 percent year-on-year contraction recorded a year ago. On a monthly basis, the growth in KB loans accelerated by 1.5 percent compared to 0.6 percent in the previous month.
The sustained growth in bank lending can be traced mainly to the improvements in KB loans to the following sectors: agriculture, fisheries and forestry sector, which grew by 26.0 percent, year-on-year; community, social and personal services, 18.2 percent; and manufacturing, 10.1 percent. These sectors accounted for about 46 percent of the total KB outstanding loans as of end-February 2003. The upturn in bank lending to the manufacturing sector in February also marked the third straight month of increase after 17 months of year-on-year decline. The growth in bank lending, particularly in the manufacturing sector, is supported by the encouraging improvements in domestic demand such as the 4.9 percent year-on-year rise in the volume of production index (VOPI) and the 16.1 percent year-on-year expansion in the value of production index (VAPI) in January 2003. The average capacity utilization in manufacturing also improved to 77.0 percent year-on-year in January from 74.7 percent in the previous month.
The favorable developments in domestic demand combined with the relative stability in the exchange rate and easing oil prices, could help boost further consumer and business sentiment. These positive factors could also propel a sustained recovery in bank lending to finance productive activities. In the light of these developments, the monetary authorities will continue to provide a supportive monetary policy environment that would deliver the appropriate level of liquidity consistent with a low-inflation growth path of the economy.