The country’s money supply and bank lending both grew slower in October as businesses and households continue to borrow less, the Bangko Sentral ng Pilipinas (BSP) reported on Friday.
In a statement, the central bank said domestic liquidity (M3) rose by 11.8 percent year-on-year to P13.5 trillion in the 10th month, slower than the adjusted 12.2-percent climb in September. Month-on-month and seasonally adjusted, M3 expanded by 0.7 percent.
Domestic claims grew by 7.9 percent year-on-year in October, but slowed from the revised 8.1-percent jump a month earlier.
“Growth in loans for production activities eased amid the contraction in lending to key sectors such as manufacturing, as well as wholesale and retail trade and repair of motor vehicles and motorcycles,” the BSP explained.
It added that “lending to households also expanded at a slower pace, driven by the slowdown in credit card and motor vehicle loans, as well as salary-based general purpose consumption loans during the month.”
Net borrowings by the national government grew by 46 percent in October, moderating from September’s adjusted 45.9-percent pickup, according to the central bank.
The rise in bank lending slowed to 1.9 percent in the 10th month from the revised 2.6 percent in September. Month-on-month and seasonally adjusted, commercial bank loans declined 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,” the central bank explained.
Lending for production activities increased by 2 percent, but moderated from September’s revised 2.3-percent climb amid the continued contraction in outstanding loans to key sectors, including manufacturing (-3.6 percent), as well as wholesale and retail trade and repair of motor vehicles and motorcycles (-4.3 percent).
Contributing to the overall expansion in production loans were real estate activities (6.8 percent); electricity, gas, steam and air conditioning supply (4.0 percent); human health and social work activities (45.6 percent); information and communication (7.5 percent); and transportation and storage (8.9 percent).
Also, loans from universal and commercial banks for household consumption grew at a slower 8 percent from the adjusted 9.8 percent surge in September, “driven by the slowdown in credit card and motor vehicle loans as well as salary-based general purpose consumption loans during the month,” the BSP said.
In a comment, Rizal Commercial Banking Corp. chief economist Michael Ricafort said any further easing of the general community quarantine in Metro Manila could result in some pickup in loan demand as more industries would be allowed to operate at a higher capacity.
“Near record-low interest rates/borrowing costs amid continued monetary easing measures would help spur demand for loans by businesses, consumers and other institutions,” he said.
The Bangko Sentral vowed to remain vigilant in monitoring domestic liquidity and credit dynamics.
“The overall stance of monetary policy continues to be accommodative, reflecting the BSP’s preparedness to deploy necessary measures to ensure that liquidity and credit remain adequate amid the ongoing Covid-19 (coronavirus disease 2019) health crisis,” it said.