MANILA, Philippines — The steady growth of liquidity in the Philippine financial system has once again not translated into the new loans needed to spur economic growth, meaning that lenders and borrowers remain risk-averse due to lingering effects of the COVID-19 pandemic.
In a statement, the Bangko Sentral ng Pilipinas (BSP) cited preliminary data showing that outstanding loans from universal and commercial banks – excluding their short-term deposits with the regulator – fell by 5% in year-over-year in April.
This follows a 4.5% contraction in March and marks the fifth consecutive month of bank lending contraction, a key indicator of the economy’s growth prospects. On a monthly, seasonally adjusted basis, outstanding universal and commercial bank loans declined 0.3%.
All of this happened in an environment of growing liquidity under the prevailing lax monetary policy regime, with the regulator hoping that historically low interest rates will encourage more borrowing but, so far, to no avail.
Preliminary data showed that the money supply in the local financial system increased 5.1% year-on-year to about 14.2 trillion yen in April 2021. This was slower than the 8.3% expansion. recorded in March. On a monthly, seasonally adjusted basis, the money supply increased 0.5%.
“Bank lending has remained weak as measures to contain the resurgence of COVID-19 cases have limited national economic activity and continued to weigh on market sentiment,” BSP said, adding that loans to consumption to residents fell 10.2% in April after falling 9.9% in April. March mainly due to continued decline in credit card loans and auto loans.
Outstanding loans to residents decreased by 4.5% while outstanding loans to non-residents decreased by 20.2%.
Likewise, outstanding loans to key industries declined, particularly wholesale and retail trade and repair of motor vehicles and motorcycles (minus 10.2%), manufacturing (minus 9.8%) and financial and insurance activities (minus 6.8%).
The drop in outstanding loans to these sectors was partly tempered by the growth in loans to professional, scientific and technical activities (106.9%); real estate activities (2.4%); and human health and social work activities (8.5 percent). The overall outstanding loans to production activities fell 3.9% in April after falling 3.2% in March.
“Going forward, the key priority of PASB is to preserve political support to facilitate the recovery of the national economy,” said PASB.
“The BSP is therefore ready to take the appropriate measures if necessary to ensure favorable financing conditions in support of national economic activity and market sentiment, in accordance with its mandates of price and financial stability”, a- he added.
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