Bangko Sentral ng Pilipinas Governor Benjamin Diokno said credit and liquidity conditions in the country remain supportive of economic growth.
Diokno, in his presentation during the Economic Journalists Association of the Philippines forum in Manila this week, said credit grew 10.5 percent as of end-June 2019 while domestic liquidity expanded 6.4 percent during the same period.
“Notwithstanding the slower growth in loans for production activities, we continue to see sustained business demand on account of favorable macroeconomic conditions in the country, particularly with the easing of inflation in 2019,” Diokno said.
Inflation eased to an average of 3.3 percent in the first seven months, on the back of slower increases in the prices of food and other commodities. This was within the 2019 target range of 2 percent to 4 percent set by the government.
Diokno said the continued lending activities by domestic banks indicated their effectiveness in facilitating a smooth flow of funds in the economy, boosting economic growth in the process.
“Banks remain sufficiently capitalized, while their past due ratios have consistently declined over the years. This enhances their capacity to manage risks and at the same time increase profitability,” he said.
Diokno said these improvements were expected to continue given the positive outlook on the macroeconomy. He said notwithstanding the external risk factors, the performance of the domestic financial markets would continue to be influenced by favorable domestic developments.
“The country’s relatively strong macroeconomic fundamentals”•of which a manageable inflation environment plays an important part”•have helped support investors sentiment,” Diokno said.
The GDP growth slowed to a four-year low of 5.5 percent in the second quarter from 5.6 percent in the first quarter, weighed down by the delayed approval of the national budget for 2019.
This brought the average growth in the first half to 5.6 percent, below the target range of 6 percent to 7 percent for the year.
Economic managers expect a strong rebound in the second half as the government vowed to ramp up fiscal spending for the rest of the year, particularly on infrastructure projects under the “Build, Build, Build” program of the Duterte administration.