Quarantine measures limit bank lending in May

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    Due to constrained economic activity following the imposition of quarantine measures to contain the COVID-19 outbreak, Bangko Sentral ng Pilipinas said outstanding loans of universal and commercial banks grew at a slower pace in May.

    Data from the central bank showed banking loans grew by 11.3 percent in May, slower than the 12.7-percent expansion in April.

    Loans for production activities grew by 9.8 percent May from 11.1 percent in the previous month.

    The continued growth in production loans was driven primarily by lending to the following sectors: real estate activities; financial and insurance activities; electricity, gas, steam and air conditioning supply; information and communication; and transportation and storage.

    Bank lending to other sectors also increased during the month, except for mining and quarrying, professional, scientific, and technical services, and manufacturing.

    Growth in loans for household consumption likewise grew at a slower pace of 30.2 percent in May compared to 33.3 percent in April due to the slowdown in credit card and motor vehicle loans during the period.

    Meanwhile, domestic liquidity (M3) grew by 16.6 percent to about ₱13.7 trillion in the same month.

    This was faster than the 16.2 percent expansion in April.

    BSP said demand for credit remained the principal driver of money supply growth.

    Domestic claims rose by 16.2 percent in May from 15.0 percent in April due mainly to the sustained growth in credit to the private sector.

    Loans for production activities continued to be driven by lending to key sectors such as real estate activities; financial and insurance activities; electricity, gas, steam and air conditioning supply; information and communication; and transportation and storage.

    Net claims on the central government grew by 59.6 percent in May, faster than the 45.5 percent growth in the previous month, owing to  increase in domestic borrowings by the National Government (NG).

    BSP said the continued stabilization of domestic liquidity conditions has given it “some room to gradually rescale its monetary operations while maintaining the accommodative stance of monetary policy.”

    “This will help the BSP’s earlier liquidity measures gain further traction by providing better guidance to short-term market interest rates,” BSP said.

    Amid the challenge of keeping credit flowing to affected businesses and households, the BSP has adopted a range of measures to support bank lending, including a further reduction of the policy rate to complement the various liquidity-enhancing and regulatory measures by the BSP.

    The BSP expects credit activity to pick up in the coming months, as economic activity resumes with the gradual reopening of the economy.