Bank Lending Slows Down in May

Preliminary data show that outstanding loans of universal and commercial banks, net of reverse repurchase (RRP) placements with the BSP, grew by 11.3 percent in May, slower than the 12.7-percent expansion in April. On a month-on-month seasonally-adjusted basis, commercial bank loans net of RRPs decreased by 0.5 percent. The deceleration reflects in part constrained economic activity following the imposition of quarantine measures to contain the COVID-19 outbreak.


Loans for production activities, net of RRPs, grew by 9.8 percent in 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 (19.6 percent); financial and insurance activities (13.9 percent); electricity, gas, steam and air conditioning supply (8.6 percent); information and communication (24.9 percent); and transportation and storage (20.4 percent). Bank lending to other sectors also increased during the month, except for mining and quarrying (-5.6 percent), professional, scientific, and technical services (-23.4 percent), and manufacturing (-3.2 percent).


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.


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.


Going forward, the BSP will remain vigilant in monitoring liquidity and credit dynamics amid significant disruptions to economic activity. The BSP reassures the public of its commitment to deploy its full range of instruments to ensure that domestic liquidity and credit remain adequate amid the ongoing coronavirus pandemic.


Source: Bangko Sentral ng Pilipinas (BSP)