Overall bank lending is likely to increase over the rest of the year, but this would not necessarily be a sign of underlying economic strength. We expect business loan demand to rise as the weak economic climate has reduced firms’ main source of internal finance, i.e. profits. There will also inevitably be an increase in demand for credit when rebuilding efforts get underway. However, spending to replace assets lost in the recent disaster would not leave the economy in a healthier position than it would otherwise have been. Household demand for loans, meanwhile, is likely to remain weak.
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