While loans from big banks or universal and commercial banks, excluding investments in the central bank’s reverse repurchase (RRP), expanded at a slightly faster rate of 11.3 percent from April’s 11.2 percent, it remains relatively slower than March’s 11.8-percent expansion rate.

In a statement on Monday, July 7, the Bangko Sentral ng Pilipinas’ (BSP) said the faster lending growth was driven by loans to businesses and individual consumers.

Growth in outstanding loans to resident borrowers, excluding RRPs, still slowed to 11.8 percent in May, from the 11.9-percent growth recorded in April, which continued slowing from March’s 12.4-percent growth.

Loans extended to non-residents fell by 6.6 percent in May, easing from a sharper 10-percent drop recorded in April.

Business loans moderated to 10.2 percent in May from 10.3 percent in the previous month. Loan growth eased in May due to slower lending to major industries such as real estate activities (8.7 percent), wholesale and retail trade and repair of motor vehicles and motorcycles (9.8 percent), and transportation and storage (14 percent), the BSP explained.

Meanwhile, loans to the manufacturing sector contracted by three percent.

Additionally, consumer loans to residents—including car, motorcycle, credit card, and general-purpose salary loans—also slowed to 23.7 percent in May from 24 percent in April.

Germany-based Deutsche Bank had asserted earlier that the BSP’s cumulative 1.25-percent interest rate reductions have been unable to lift lending growth, as lower borrowing costs were not enough to outweigh persistent economic uncertainty.

Deutsche Bank Research was not primarily pointing toward the lowered key interest rates as the major factor to the sluggish credit activity in the country. It instead noted that “the ongoing uncertainty is likely a larger factor than interest rates in businesses holding back their decisions to borrow.”

The policy rate now stands at 5.25 percent from 6.5 percent before the monetary policy loosening cycle started a year ago.

Bank loans are closely monitored by the central bank as they serve as a major transmission channel for monetary policy decisions to flow through the economy.

Money supply or domestic liquidity, as measured by M3, expanded at a more sluggish pace in May, expanding only by 5.5 percent from 5.8 percent in April—a rate of which already moderated from 6.2 percent in March.

By value, the amount of money in the country’s economy increased to ₱18.4 trillion in May from ₱18.2 trillion in April, preliminary data from the BSP showed.

Claims on the domestic sector—including both private and government entities—slowed to 10.7 percent from the 10.9 percent year-on-year growth in April.

Loans to the private sector alone eased to 10.9 percent from 11.5 percent in the previous month. This saw a continued slowdown from 11.6 percent seen in March despite the ongoing expansion in bank lending to non-financial private firms and households.

Net claims on the central government climbed by 9.1 percent in May, slightly down from 9.3 percent, but this was still faster than March’s 8.1-percent growth.

Net foreign assets (NFA), measured in pesos, continued to drop in May as it posted as steeper 4.6-percent decline compared to the 0.2-percent decrease recorded in April. It saw a 2.6-percent growth in March.

“Banks’ NFA declined largely on account of higher foreign currency-denominated bills payable,” the BSP said. The central bank’s NFA fell by 4.4 percent mainly because the local currency strengthened against the US dollar.

“Looking ahead, the BSP will ensure that domestic liquidity and bank lending conditions remain aligned with its price and financial stability objectives,” the central bank said.