Thursday, 4 June 2009

More puzzles behind Philippine GDP figure

Lending, liquidity still growing
Jun Vallecera
Business Mirror
http://www.businessmirror.com.ph/home/top-news/11286-lending-liquidity-still-growing.html

BANK lending as well as money demand sustained continued double-digit growth rates in April, deepening the mystery behind why local output was a tepid 0.4 percent in the first three months and sharply lower than the consensus forecast growth of around 2.5 percent.

Latest numbers from the Bangko Sentral ng Pilipinas (BSP) show bank loans expanding again by 13.4 percent in April while domestic liquidity, which measures money accessible by consumers and businesses, lifted by another 13.7 percent.

Both are lagging indicators of the state of the economy, but they pertain to that now-perplexing period when economic activities in the country supposedly crawled to near-zero state.

“The double-digit growth of outstanding loans of commercial banks including [the BSP’s borrowing] or reverse repurchase agreements [RRPs] was sustained at 13.4 percent in April, albeit a deceleration from the previous month’s growth of 18.9 percent.

“Net of RRP placements with the BSP, bank lending grew at a faster pace of 19.0 percent in April from 17.8 percent in the previous month,” BSP Governor Amando Tetangco Jr. said in a statement.

The bulk of these loans were for production purposes, its volume rising faster during the month to 18.1 percent from 16.8 percent in March.

Consumption loans, mainly credit cards, personal loans, housing loans and cars purchased on deferred-payment basis, also quickened to 13.3 percent from only 9 percent the previous month.

Gross bank loans totaled P2.144 trillion but stood at P1.989 trillion on net (that is, excluding interbank lending) basis.

Loans extended to the following sectors, which comprised nearly half of total loans, contributed significantly to lending growth: agriculture, hunting, and forestry (which grew by 33.6 percent); real estate, renting and business services (by 36.8 percent); transportation, storage and communication (by 68.2 percent); electricity, gas and water (by 34.6 percent); and other community, social and personal services (by 37.3 percent).

Loans to the manufacturing sector and financial intermediation activities, which accounted for more than a quarter of total loans, likewise contributed to lending growth, although marginally, at less than one percent each.

Meanwhile, bank lending to wholesale and retail trade; public administration and defense; education; construction; and mining and quarrying sectors registered contractions during the month.

“These developments affirmed the BSP’s commitment to help provide the appropriate macroeconomic conditions for continued credit expansion, while fulfilling its primary mandate of maintaining price stability,” Tetangco said.

He reported a slight deceleration in liquidity growth, also known as M3, from the 15.6 percent recorded in March to 13.7 percent in April.

“The expansion in liquidity was fueled mainly by the continued rise in net foreign assets at 20.2 percent in April, which can be traced to the sustained growth in the net foreign assets of the BSP and the banks at 19.8 percent and 22.5 percent, respectively.

“Net foreign assets rose as the BSP continued to build up its international reserves and banks settled a significant portion of their foreign liabilities,” Tetangco said.

He vowed to continue to monitor the level of money in the financial system to ensure an adequate supply of liquidity for the orderly functioning of the markets and to provide for the economy’s growth requirements, while guarding against any potential build-up in price pressures.

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