M3, bank lending growth ease in Sept

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Credit: Read the original article from Manila Times.

The country’s money supply and bank lending both expanded in September, but at a moderate pace, the Bangko Sentral ng Pilipinas (BSP) reported on Wednesday.

In a statement, the central bank said domestic liquidity (M3) picked up by 12.3 percent year-on-year to P13.5 trillion in the ninth month, slower than the revised 13.7 percent in August. Month-on-month and seasonally adjusted, M3 rose by 0.2 percent.

Domestic claims climbed by 8.2 percent year-on-year in September from the revised 10 percent the month before.

“Claims on the private sector, driven mainly by bank lending to nonfinancial private corporations and households, grew at a weaker pace due to constrained economic activity and weak corporate sector performance,” the BSP explained.

Net borrowings by the national government soared by 45.7 percent in September, easing
from August’s adjusted 50 percent, partly because of “the government’s lower funding requirement during the month,” it said.

Expansion in bank lending decelerated to 2.8 percent in the ninth month from 4.7 percent a
month earlier. Month-on-month and seasonally adjusted, commercial bank loans fell by 1 percent.

“The general decline in bank growth partly reflects banks’ reduced tolerance for risk; decline in loan demand due…to weak business and income prospects; and observed shift by nonfinancial corporates to alternative sources of funds,” the central bank explained.

Lending for production activities widened by 2.4 percent, also slower than August’s revised 4.1-percent rise, it said, as loans across most sectors decelerated during the month.

Outstanding loans to key sectors also continued to ease, particularly in manufacturing, (-2.6 percent), as well as wholesale and retail trade and repair of motor vehicles and motorcycles (-3.4 percent).

Contributing to the overall expansion in production loans were real estate activities (7.3 percent); information and communication (9.7 percent); electricity, gas, steam and air conditioning supply (3.0 percent); human health and social work activities (44.5 percent); and transportation and storage (8.4 percent).

Also, loans from universal and commercial banks for household consumption grew at a slower 10.2 percent from 12.9 percent in August, “mainly due to the continued slowdown in credit card and motor vehicle loans during the month,” the BSP said.

The Bangko Sentral said its accommodative monetary policy stance, together with the national government’s ongoing health and fiscal initiatives, remained crucial in supporting market sentiment and credit activity.

“Going forward, the BSP remains prepared to calibrate its monetary instruments as needed to ensure adequate domestic liquidity and credit in support of economic activity amid the Covid-19 (coronavirus disease 2019) pandemic,” it added.

In a comment, ING Bank Manila senior economist Nicholas Antonio Mapa said the deceleration in bank lending reflected the current trends in the economy, with capital formation cratering as both firms and corporates hold back big-ticket investments to wait out the economic storm.

“From here, we can only expect downward trends in lending across most sectors to fall, households into single digits soon and overall lending to edge closer to zero with the economy [still reeling from the coronavirus] pandemic,” he warned.

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