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Philippines: Bank lending down for 8th straight month
MANILA, Philippines — Loans released by big banks shrank for the eighth straight month, although at a slower pace of 0.7 percent in July from two percent in June, as consumer lending contracted further due to rising COVID-19 infections with the emergence of the highly contagious Delta variant.
Preliminary data released by the Bangko Sentral ng Pilipinas (BSP) showed the outstanding loans of universal and commercial banks amounted to P9.12 trillion in July – P60.63 billion lower than the P9.18 trillion recorded in end-June last year.
The central bank said the new wave of COVID infections owing to more virulent virus strains leading to intermittent lockdowns continues to dampen economic prospects and temper market sentiment.
Data showed lending for production activities finally recovered, inching up by 0.8 percent in July from a contraction of 0.6 percent in June. Disbursements amounted to P8.04 trillion and accounted for 88.2 percent share of the total.
“This is the first time that outstanding production loans have increased since the reported growth rate of 0.5 percent in November 2020,” the BSP said.
Loans released to the real estate sector went up by 5.9 percent to reach P1.82 trillion and accounted for 20 percent of the total disbursements, while lending to the electricity, gas, steam and air-conditioning supply sector inched up by 2.1 percent to P1.04 trillion for an 11.4 percent share.
On the other hand, loans to the wholesale and retail trade as well as repair of motor vehicles and motorcycles contracted by 4.5 percent to P1.06 trillion for a share of 11.6 percent, while lending to the manufacturing sector dropped by 5.8 percent to P1 trillion or an 11 percent share.
Furthermore, consumer lending continued to contract as lending to households slumped by 8.2 percent to P814.59 billion in July from P887.27 billion in the same month last year, for a share of 8.9 percent of total loan releases.
Despite the improving default rate of borrowers as the economy recovers from the impact of the pandemic, credit card loans declined by 1.6 percent to P402.35 billion from P409.05 billion.
Motor vehicle loans fell by 15.4 percent to P322.62 billion from P381.14 billion.
Despite the accommodative monetary policy stance and record-low two percent benchmark rate, credit activity remains weak as the still elevated number of COVID cases continues to hamper full recovery from the impact of the global health crisis.
“Looking ahead, the BSP will continue to prioritize monetary policy support in order to ensure the continued momentum of economic recovery. At the same time, the national government’s targeted fiscal initiatives and health interventions will be crucial in boosting domestic demand and strengthening the recovery,” the central bank said.
Meanwhile, the expansion of domestic liquidity slowed to 5.9 percent in July from 6.5 percent in June amid slower demand for loans in recent months due to the pandemic as well as tighter lockdown and quarantine measures.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said liquidity growth already slowed from double-digit levels as last seen in the latter part of 2020, partly due to higher base effects amid aggressive liquidity infusion measures in the early part of the pandemic last year.
“For the coming months, tighter quarantine restrictions in NCR Plus in March and August could still reduce economic activities that could also fundamentally lead to slower demand for bank loans,” Ricafort said, referring to the National Capital Region and nearby provinces.
He said additional liquidity infusion measures such as further lowering of the reserve requirement ratio are still possible in order to help further reduce borrowing costs and provide greater support measures to the economy.
Source: https://www.philstar.com/business/2021/09/02/2124162/bank-lending-down-8th-straight-month