Commercial bank (KB) lending grew by 3.0 percent year-on-year to reach P1.46 trillion as of end-April 2003, recording eight straight months of continued expansion. The sustained increase in the volume of outstanding loans of KBs in April 2003 at 3.0 percent is a marked turnaround from the 2.2 percent year-on-year contraction recorded a year ago. However, this growth was slightly lower compared to the 3.2 percent year-on-year rise in the previous month.
The growth in bank lending during the month was traced mainly to the expansion in KB loans to the following sectors: agriculture, fisheries and forestry sector, which grew by 55.1 percent, year-on-year; community, social and personal services, 10.1 percent; wholesale & retail trade, 7.6 percent; manufacturing, 3.2 percent; and electricity, gas and water, 2.1 percent. Altogether, these sectors accounted for almost two-thirds of total outstanding KB loans.
In recent months, the growth in bank lending has been accompanied by robust consumption spending and increased output in the manufacturing sector as reflected by recent data on the first quarter performance of the Philippine economy. The country’s gross domestic product (GDP) expanded by 4.5 percent during the first quarter of 2003, up from 3.8 percent during the same quarter in the previous year. On the demand side, personal consumption expenditures, accounting for 70.4 percent of GDP, rose further by 4.9 percent during the first quarter of 2003 from the 3.5 percent expansion registered during the same quarter in the previous year. The growth in manufacturing output, meanwhile, accelerated to 5.4 percent from 2.4 percent in the previous year which resulted in the increase in the average capacity utilization of key manufacturing firms to 78.5 percent in March 2003 from 75.8 percent in the previous year. The expansion in economic activity was supported by an increase in bank lending which was made possible by the improvement in the quality of banks’ assets, indicated by the easing of the KB’s non-performing loan ratio to total loans from 18.0 percent in March 2002 to 15.5 percent in March 2003.
Going forward, monetary policy will continue to help promote an environment that is conducive to sustained credit growth. At the same time, monetary authorities will continue to watch carefully economic and financial developments, both here and abroad, to guard against price pressures that the growth process may bring about.