The Bangko Sentral has found no signs of asset price bubbles in the property or financial markets, despite a 20-percent growth in bank loans, which outpaced the economic growth of just 4 percent in the first half of the year.
Bangko Sentral Deputy Governor Diwa Guinigundo said the 20 percent growth in outstanding bank loans as of August 2011 might even be considered as promotive of economic growth.
“If one is to look in the distribution of those loans, it is the productive sectors of the economy that has been getting these loans such as mining and quarrying, agriculture, manufacturing, and even those for financial intermediation,” said Guinigundo.
Data showed that loans for production activities surged 21.5 percent year-on-year in August while the growth in consumer loans reached 13.4 percent during the same period.
“It is important that we have enough loans for the various sectors of the economy, coupled with ample supply of domestic liquidity. Liquidity has been growing for something like 10 percent for August,” he said.
Bankers Association of the Philippines president Aurelio Montinola III earlier expressed concern over the rapid increase in bank loans, in excess of the 4-percent expansion of the gross domestic product.
A substantial growth in bank lending, representing more than three times the GDP growth, could in fact be inflationary, according to some economists.
However, Guinigundo said there were evidence that the growth in bank loans was driven by real demand in the economy.
“The Monetary Board also looks at the various asset markets—foreign exchange, equities, and even real estate. We try to look at the long-term trends of the prices in these asset markets. And the conclusion is that the possibility of a bubble situation continues to be remote. In other words, the movement in these asset markets continues to be driven by fundamentals,” said Guinigundo. –Roderick T. dela Cruz, Manila Standard Today
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