THE free fall of bank lending finally slowed down in May this year, after 12 consecutive months of deterioration due to risk aversion brought about by the pandemic-related disruptions to the economy.
The Bangko Sentral ng Pilipinas (BSP) reported on Wednesday that bank lending continued to contract in May, albeit at a slower pace from the April contraction. In particular, bank lending declined by 4 percent in May. This is slower than the 5-percent contraction recorded in the previous month.
Bank lending first collapsed into the contraction territory in December 2020 by 0.7 percent. May is the sixth consecutive month of bank lending contraction despite the aggressive efforts of the BSP to lower interest rates and boost liquidity conditions.
In comparison, the Philippines’s bank lending grew 13.6 percent before the onslaught of the global health crisis in March 2020.
“Credit activity has remained muted as the emergence of new coronavirus variants and the continued risk of infection dampen prospects for economic recovery,” the BSP said in a statement.
Broken down, outstanding loans to major industries fell anew, particularly to manufacturing—which contracted by 7.9 percent, wholesale and retail trade and repair of motor vehicles and motorcycles with a 7.1-percent decline, and professional, scientific and technical activities which was down by 56.9 percent.
The decrease in outstanding loans to these industries was partially offset by the increase in loans to real-estate activities which grew by 3.9 percent, information and communication which grew by 3.4 percent, human health and social work activities which was up 13.7 percent, and construction, at 2.8 percent higher.
Consumer loans to residents, meanwhile, fell by 9.2 percent in May following a 10.2-percent decrease in April as motor vehicle loans and salary-based consumption loans continued to decline.
Liquidity
CASH supply, meanwhile, continued to expand in May. The BSP said domestic liquidity, broadly measured as “M3,” expanded by 4.7 percent to about P14.3 trillion in May. At this juncture, the BSP reiterated its stance to keep the monetary policy settings accommodative to push economic activity and support the recovery in the country.
“The BSP shall sustain monetary policy support in order for the economic recovery to gain more traction. In ensuring a favorable financing environment, the BSP will remain vigilant against emerging risks to inflation and economic growth, consistent with its price and financial stability mandates,” the BSP said.