Commercial bank (KB) lending grew by 3.4 percent year-on-year to reach P1.46 trillion as of end-May 2003, recording nine straight months of continued expansion. The sustained increase in the volume of outstanding loans of KBs in May 2003 reflected a marked turnaround from the 1.8 percent year-on-year contraction recorded a year ago and an acceleration from the 3.0 percent growth in the previous month.
The annual growth in bank lending in May was traced mainly to the expansion in KB loans to the following sectors: agriculture, fisheries and forestry sector, which grew by 65.2 percent; electricity, gas, and water, 9.7 percent; community, social and personal services, 6.6 percent; wholesale & retail trade, 2.7 percent; and financial institutions, real estate and business services, 2.2 percent. Altogether, these sectors accounted for two-thirds of total outstanding KB loans.
The sustained increase in bank lending was supported by the steady growth in aggregate domestic demand as the country’s Gross Domestic Product (GDP) grew by 4.5 percent in the first quarter. The steady rise in manufacturing output and robust consumption spending continued to support the domestic economy. In addition, the ratio of KB’s non-performing loans to total loans has declined steadily to 15.5 percent in April 2003 from the year-ago level of 18.2 percent and has remained relatively stable at around 15.0 percent since January 2003. This improvement in banks' asset quality also contributed to the encouraging uptrend in bank lending.
Going forward, monetary policy will continue to provide a supportive environment that would ensure sufficient liquidity to finance the requirements for sustained economic growth. At the same time, the BSP will continue to watch vigilantly for any possible resurgence of inflationary pressures that could pose a risk to achieving a low and stable inflation.