Limping PH economy cut bank loan growth down in June

Bank lending growth slowed down in June despite the massive liquidity pumped into the economy by the central bank as the Philippines grappled with the weak demand caused by the worsening coronavirus pandemic, according to the latest available data.

Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed that outstanding loans of universal and commercial banks—excluding short-term placements made with the regulator—expanded by 9.6 percent in June, which was slower than the 11.3-percent growth in May.“The slowdown in bank lending reflects in part the weak domestic economic prospects and constrained economic activity following the imposition of quarantine measures to contain the COVID-19 outbreak,” the central bank said.

On a month-on-month seasonally adjusted basis, commercial bank loans net of overnight placements with the central bank decreased by 1.1 percent.The growth of loans for production activities also slowed down to 8.3 percent in June from 9.8 percent in the previous month.

The continued growth in production loans, albeit at a slower pace, was driven primarily by lending to real estate activities (16.8 percent), financial and insurance activities (10.6 percent), information and communication (23.7 percent), electricity, gas, steam and air conditioning supply (5.4 percent) and transportation and storage (11.0 percent).

Bank lending to other sectors also increased during the month, except for mining and quarrying (-2.8 percent), professional, scientific and technical services (-5.5 percent) and manufacturing (-0.7 percent).

Similarly, loans for consumption of households, still reeling from the partial mobility restrictions and weak consumer confidence, grew at a slower pace of 26.7 percent in June from 30.2 percent in May, following slowdown in credit card, motor vehicle and salary-based general purpose consumption loans during the month.Meanwhile, the total amount of cash and “near-cash” items circulating in the Philippine financial system also grew at a slower pace in June, according to the central bank.

Preliminary data show that domestic liquidity or money supply grew by 14.9 percent year-on-year to about P13.6 trillion in June. This was slower than the 16.7-percent expansion in May. On a month-on-month seasonally adjusted basis, M3 decreased by 1.1 percent.

Demand for credit remained the principal driver of money supply growth, with domestic claims rising by 13.3 percent year-on-year in June from 16.2 percent in May. Net borrowings by the central government grew by 53 percent in June from 59.7 percent in the previous month, reflecting in part the government’s higher funding requirement to fight the pandemic.

“Claims on the private sector, driven mainly by bank lending to nonfinancial corporations and households, also expanded at a slower pace during the month due to constrained economic activity and weak business prospects,” the BSP said. INQ