Bank lending continues to fall; money supply slows

Published May 31, 2021, 5:30 PM

by Lee C. Chipongian

Big banks’ outstanding loans continued to shrink while money supply or M3 slowed down in April, the Bangko Sentral ng Pilipinas (BSP) reported.

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

Bank lending net of reverse repurchase (RRP) placements with the BSP declined to P8.998 trillion in April from P9.474 trillion same period in 2020.

The April contraction is bigger than March’s 4.5 percent.

The BSP noted that on a month-on-month seasonally-adjusted basis, the total lending of universal and commercial bank net of RRPs dipped by 0.30 percent.

In the meantime, outstanding loans to non-residents net of RRPs declined by 20.2 percent to P250.680 billion versus P313.948 billion in 2020.

Based on BSP numbers, the consumer loans to residents fell by 10.2 percent in April to P824.304 billion from P918.180 billion, mainly because of lower credit card and motor vehicle loans.

Productivity loans to big industries also continue to fall in April to P7.923 trillion or 3.9 percent down from same period last year of P8.242 trillion.

The BSP said that its “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,” it added.

The BSP also reported that in April, domestic liquidity or M3 increased by 5.1 percent year-on-year to P14.198 trillion. This was slower than the 8.3-percent M3 growth in March.

On a month-on-month seasonally-adjusted basis, M3 went up by 0.5 percent, said the BSP.

The BSP noted that domestic claims eased to 1.8 percent year-on-year in April compared to a bigger growth of 5.6 percent in March as bank lending also contracted.

Net claims on the central government grew by 23.6 percent in April from 47.4 percent in March, due partly to the sustained borrowings by the National Government, said the BSP.

The central bank’s net foreign assets (NFA) was up by 18.3 percent in April which was “broadly steady” from the 18.1 percent in the previous month. “The expansion in the BSP’s NFA position reflected the increase in the country’s level of gross international reserves. Meanwhile, the NFA of banks expanded at a faster pace as banks’ foreign liabilities declined anew on account of lower bills payables,” said the BSP.

 
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