Bank lending in April slides further by 5%

They’re not Tom Cruise wannabes. But these workers face real-life risks as they do their jobs cleaning up the glass façade of a call center building along W. Diokno Boulevard in Pasay City.

BANK lending in the country continued its free fall in April, as the Bangko Sentral ng Pilipinas (BSP) reported a faster contraction during the month.

Bank lending fell by 5 percent in April this year, falling faster than the 4.5-percent contraction seen in March.

Bank lending first collapsed into contraction territory in December 2020 by 0.7 percent. April is the fifth consecutive month that bank lending contracted and the twelfth consecutive month that bank lending has slowed despite the BSP’s aggressive efforts to lower interest rates and boost liquidity conditions.

In comparison, the Philippines’s bank lending rate was at 13.6-percent growth in March 2020, when the pandemic first hit local shores.

“Bank lending remained weak as measures to contain the resurgence in Covid-19 cases constrained domestic economic activity and continued to dampen market sentiment,” the BSP said in a statement on Monday.

Broken down, the BSP said outstanding loans to key industries fell. Specifically: loans to wholesale and retail trade and repair of motor vehicles and motorcycles fell by 10.2 percent; to manufacturing by 9.8 percent; and to financial and insurance activities by 6.8 percent.

The decline in outstanding loans to these sectors was partly tempered by the growth in loans to professional, scientific and technical activities by 106.9 percent, real-estate activities by 2.4 percent, and human health and social work
activities by 8.5 percent.

Consumer loans to residents also decreased by 10.2 percent in April after declining by 9.9 percent in March. The BSP attributed this mainly to the continued drop in credit card and motor vehicle loans.

Expanding liquidity

The decline in bank lending also still happened in an environment of expanding domestic liquidity in the country.

In a separate statement, the BSP said domestic liquidity—broadly measured as M3—grew by 5.1 percent during the month to P14.2 trillion. This was, however, slower than the 8.3-percent growth seen in the previous month.

“Going forward, the BSP’s key priority is to preserve policy support to facilitate the recovery of the domestic economy.

The BSP thus stands prepared to take appropriate measures as necessary to ensure favorable financing conditions in support of domestic economic activity and market sentiment, consistent with its price and financial stability mandates,” the BSP said.


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