The amount of money circulating in the economy expanded significantly, but that increased liquidity failed to prevent the country’s major banks from posting their weakest loan growth in more than a year.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that lending by universal and commercial banks (U/KBs) expanded at a slower pace in October, growing 10.3 percent year-on-year, from the 10.5 percent recorded in September.

The expansion marked the slowest growth in 16 months, surpassing September’s 14-month low and matching the 10.1 percent growth seen in both May and June of last year, according to the BSP.

Outstanding loans to Philippine residents held steady at 10.9 percent growth in October. In contrast, outstanding loans to non-residents—which cover foreign currency deposit units (FCDUs) extending credit abroad—posted a deeper contraction of 11.1 percent, accelerating from a 2.9 percent decline in September.

Loans supporting business activities maintained a growth rate of 9.1 percent during the month. The BSP noted improved lending growth for several key industries: Real Estate Activities rose to 9.9 percent from 9.2 percent; Wholesale & Retail Trade, Motor Vehicle/Motorcycle Repair climbed to 11.7 percent from 9.1 percent; Transportation and Storage jumped to 15.4 percent from 13 percent; and Information and Communication reached 8.6 percent from 8.2 percent.

Growth, however, decelerated in sectors including Electricity, Gas, Steam, & Air-Conditioning Supply, which slowed to 24.8 percent from 27.1 percent; and Financial and Insurance Activities, which eased to 8.5 percent from 8.8 percent.

Meanwhile, consumer loans to residents expanded by 23.1 percent, its weakest growth in two years since the 22.8 percent growth in October 2023. These loans include credit card, motor vehicle, and general-purpose salary loans.

Jonathan Ravelas, Senior Adviser at Reyes Tacandong & Co., linked the slowdown to “lingering high borrowing costs and cautious sentiment amid uncertainty.”

“Businesses are delaying expansion, and consumers are prioritizing essentials. While BSP’s rate cuts help, confidence and liquidity matter more,” Ravelas said.

The BSP has cumulatively reduced the benchmark rate by 175 basis points (bps) to the current 4.75 percent.

Ravelas suggested that for the cuts to be effective, the BSP “must pair them with clear communication and trust-building measures, while businesses should focus on resilience and efficiency.”

Meanwhile, domestic liquidity (M3)—the broad measure of money supply—expanded by 8.3 percent in October, breaching the ₱19 trillion level. This was a one percentage point (ppt) acceleration from September’s 7.3 percent expansion rate.

Claims on the domestic sector—which account for both private and government borrowers and are key drivers of money supply growth—slowed slightly to 10.5 percent in October from 10.6 percent in September.

Claims on the private sector rose 11 percent, faster than the 10.7 percent growth in the prior month, driven by the “continued expansion in bank lending to non-financial private corporations and households.”

Net claims on the government accelerated to 10 percent in October, from 10.3 percent in September, due to higher government borrowings.