With weak demand and risk-aversion, big banks’ lending growth further slowed down to 1.9 percent in October from 2.6 percent in September, based on Bangko Sentral ng Pilipinas (BSP) data.

Domestic liquidity (M3) or the amount of money supply circulating in the financial system, in the meantime, grew by 11.8 percent year-on-year to P13.5 trillion in October, a slower pace of growth from 12.2 percent in September.

Commercial and universal banks’ lending, net of reverse repurchase (RRP) placements with the BSP, on a month-on-month seasonally-adjusted basis, decreased by 0.4 percent.

“The overall slowdown in bank lending growth reflects the combined effects of muted business confidence and banks’ stricter loan standards attributed mainly to continued disruptions in business operations,” said the BSP in statement. It said however that it will remain “vigilant” in closely monitoring credit and liquidity and they continue to reassure the public that it is ready to “deploy necessary measures to ensure that liquidity and credit remain adequate amid the ongoing COVID-19 health crisis.”

Bank lending for production activities grew by two percent in October, lower from September’s 2.3 percent. The BSP observed continued contraction in outstanding loans to key sectors including manufacturing which contracted by 3.6 percent, and wholesale and retail trade and repair of motor vehicles and motorcycles that also contracted by 4.3 percent.

Lending to households, on the other hand, went up by eight percent but it is lower compared to 9.8 percent in September. Credit card, motor vehicle and salary-based general purpose consumption loans posted lower growth during the period.

According to the BSP, “the stance of monetary policy of the BSP remains accommodative given the benign inflation outlook and stable inflation expectations.” It noted that policy rate easing should “serve to complement fiscal measures in supporting domestic demand, with targeted fiscal spending and government health initiatives in place to counteract risk aversion and weak credit demand.”

As for M3, it decreased by 0.7 percent on a month-on-month seasonally-adjusted basis, with domestic claims growth of 7.9 percent in October from 8.1 percent in September as bank lending “remained tepid.”

The BSP reported net foreign assets (NFA) in peso terms went up by 23.3 percent year-on-year in October versus 20.5-percent in September. It said that the expansion in the BSP’s NFA position mirrored the expansion in gross international reserves which has surpassed the $100 billion mark.

As for the growth in banks’ NFA, this “eased as banks’ foreign assets fell due to lower loans and investments in marketable securities,” said the BSP.