BSP Managing Director for research Diwa Guinigundo said the monetary authorities have assumed a sluggish demand for borrowed funds this year, largely, on the account of cautious borrowing stance of the private sector, mostly, during the first semester of the year.

The lower projection also took into consideration the timid lending stance of banks.

This attitude of lenders have been the primary factor that pulled down the growth in credit to 10 percent for 2003. Banks have been very selective in lending out funds to borrowers because of their huge level of non-performing assets, which has constricted their lending ability.

But, despite this, Guinigundo said the sharp improvement in consumer spending has been observed, a development that can bridge some of the gaps.

"The evidence that consumption activity has remained robust despite subdued private credit growth suggests that consumption spending in the Philippines may not be significantly dependent on the availability of credit," he said.

For the year past, Guinigundo said, bulk of the credit availments was from the public sector, through the issuance of government securities.

Overall lending has remained slow over the past two years, largely on account of the continued presence of spare capacity in manufacturing, as well as the high level of banks’ nonperforming loans. (FCS)