Bank Lending Decelerates Further in July 2020
Preliminary data show that outstanding loans of universal and commercial banks, net of reverse repurchase (RRP) placements with the BSP, grew by 6.7 percent in July, slower than the 9.6-percent expansion recorded in the previous month. On a month-on-month seasonally-adjusted basis, commercial bank loans net of RRPs decreased by 0.9 percent. The slowdown in bank lending can be traced to weaker corporate sector performance and declining loan demand, as the ongoing health crisis continued to constrain domestic economic activity.
Loans for production activities, net of RRPs, grew by 5.9 percent in July from 8.2 percent (revised) in June. The expansion in production loans was driven primarily by lending to the following sectors: real estate activities (11.5 percent); information and communication (18.4 percent); financial and insurance activities (6.3 percent); electricity, gas, steam, and air conditioning supply (4.4 percent); human health and social work activities (46.7 percent); and transportation and storage (9.7 percent).
Likewise, loans to households grew at a slower pace of 17.3 percent in July from 27.0 percent (revised) in June following the further slowdown in credit card, motor vehicle, and salary-based general purpose consumption loans during the period.
The BSP’s measures to ensure the flow of credit to affected households and businesses are expected to gain further traction in the coming months and help drive lending activity. Sustained monetary and fiscal policy support should likewise help shore up market sentiment as the economy gradually reopens. Looking ahead, 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 significant economic disruptions due to the ongoing health crisis.