June M3, bank lending growth pace slower
THE pace of growth of the country’s money supply and in bank lending decelerated in June, the Bangko Sentral ng Pilipinas (BSP) reported on Friday.
In a statement, the central bank said domestic liquidity (M3) rose by 14.9 percent year-on-year to P13.6 trillion in June, slower than the revised 16.7 percent in May. Month- on- month and seasonally adjusted, M3 shrank by 1.1 percent.
Bank- lending expansion also eased to 9.6 percent in June from 11.3 percent a month earlier. Month-on-month and seasonally adjusted, commercial bank loans also fell by 1.1 percent.
“Demand for credit remained the principal driver of money supply growth,” the BSP said, but noted that the increase in domestic claims slowed to 13.3 percent in June from May’s 16.2 percent.
Net borrowings by the central government soared by 53 percent in June, slower than the revised 59.7 percent the previous month, “reflecting in part the government’s higher funding requirement to fight the coronavirus disease 2019 pandemic,” it added.
“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 Bangko Sentral explained.
Lending for production activities grew by 8.3 percent, also slower than May’s 9.8-percent climb.
The sustained expansion in production loans 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 rose during the month, except for mining and quarrying (-2.8 percent), professional, scientific, and technical services (-5.5 percent), and manufacturing (- 0.7 percent).
Meanwhile, loans from universal and commercial banks for household consumption increased by 26.7 percent, slower than May’s 30.2 percent.
Loans for consumption of households are “still reeling from the partial mobility restrictions and weak consumer confidence,” the Bangko Sentral said.
The deceleration in bank lending expansion “reflects in part the weak domestic economic prospects and constrained economic activity following the imposition of quarantine measures to contain the Covid-19 (coronavirus disease 2019)” pandemic, it added.
The BSP continues to adopt measures to ensure the flow of credit to affected businesses and households. This includes the further reduction in the policy rate and in the reserve requirement ratios of thrift and rural/cooperative banks.
“Looking ahead, credit activity is seen to stabilize and pick up in the coming months as economic activity resumes with the gradual reopening of the economy,” it said.
The central bank also reassured the public of its commitment to deploy instruments to ensure that domestic liquidity and credit remain adequate amid significant disruptions to economic activity caused by the current health crisis.