Bank lending contraction slowed down for the second consecutive month in June, the Bangko Sentral ng Pilipinas (BSP) reported on Friday.
Central Bank data showed that outstanding loans of universal and commercial banks decreased by 2 percent in June this year from its level in the same month last year. While still in contraction mode, this is slower than the 4 percent decrease seen in May this year.
Bank lending first collapsed into the contraction territory in December 2020 by 0.7 percent. June is the seventh consecutive month of bank lending contraction despite the aggressive efforts of the BSP to lower interest rates and boost liquidity conditions.
In comparison, the Philippinesâ bank lending grew 13.6 percent before the onslaught of the global health crisis in March 2020.
The BSP attributed the contraction in loans to âconcerns over the spread of new coronavirus variantsâ which continued to temper market sentiment and the outlook for economic recovery.
âLooking ahead, the BSP shall continue to provide monetary policy support in order for the economic recovery to gain further traction. At the same time, the National Governmentâs targeted fiscal initiatives and accelerated vaccination program remain critical in helping to restore market confidence and strengthening the recovery process,â the BSP said in a statement.
Broken down, outstanding loans to major industries continued to fall but at a slower rate. Wholesale and retail trade and repair of motor vehicles and motorcycles fell by 6.2 percent while loans to the manufacturing sector was down by 5.8 percent.
The contraction in outstanding loans to these key sectors was partly moderated by the growth in loans to real estate activities at 4.8 percent, information and communication at 9.1 percent, electricity, gas, steam, and air conditioning supply at 2.2 percent, and transportation and storage at 6.8 percent.
Consumer loans to residents, meanwhile, went down by 8.6 percent in June from a 9.2-percent decrease in May as motor vehicle loans and salary-based consumption loans declined further.
Cash supply, meanwhile, continued to expand in June. The BSP said domestic liquidity, broadly measured as âM3â, expanded by 6.4 percent to about P14.4 trillion during the month.
âThe BSP will ensure that domestic liquidity remains ample to allow the economic recovery to gain traction, in line with the BSPâs price and financial stability objectives,â the BSP said.