Higher interest rates and elevated inflation led to a slight growth slowdown in bank lending in July 2023, the Bangko Sentral ng Pilipinas said over the weekend.
Preliminary data showed that outstanding loans of universal and commercial banks, net of reverse repurchase (RRP) placements with the BSP, expanded 7.7 percent year-on-year in July, slower than 7.8 percent in June.
It said that on a month-on-month seasonally-adjusted basis, outstanding universal and commercial bank loans, net of RRPs, rose 0.6 percent, similar with the previous month.
“The growth in bank lending has continued to ease in line with the prevailing tight monetary policy stance of the BSP,” the BSP said in a statement.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said the slower bank lending growth was due to the rising trend in US/global/local interest rates in recent months, as well as higher prices/inflation that “led to higher borrowing/financing costs for consumers, businesses/industries, and other institutions.”
The growth in outstanding loans to residents, net of RRPs, slowed to 7.7 percent in July from 7.9 percent in June.
Outstanding loans for production activities increased by 6.2 in July after rising by 6.3 percent in the previous month, due to the continued increase in loans to major sectors, particularly electricity, gas, steam, and airconditioning supply (10.6 percent); wholesale and retail trade, and repair of motor vehicles and motorcycles (9.4 percent); real estate activities (5.0 percent); information and communication (10.8 percent); and transportation and storage (14.9 percent).
Consumer loans to residents grew by 22.6 percent in July, slower than 23.7 percent in June, driven by the increase in credit card and motor vehicle loans.
Outstanding loans to non-residents rose 6.2 percent in July from 4.8 percent in the previous month.
The BSP also said that domestic liquidity, or the money supply circulating in the financial system, grew by 5.7 percent year-on-year to about P16.2 trillion in July 2023, slower than 5.9 percent in June. On a month-on-month seasonally-adjusted basis, M3 increased by about 0.2 percent.
Domestic claims rose by 8.9 percent year-on-year in July from 10.1 percent in the previous month. Claims on the private sector expanded by 8.2 percent in July from 7.9 percent in June, driven by growth in bank lending to non-financial private corporations and households.
Net claims on the central government grew by 12.5 percent in July from 17.2 percent in June due mainly to the borrowings by the national government.
Net foreign assets (NFA) in peso terms fell by 2.6 percent year-on-year in July following a 2.8-percent decline in June. The BSP’s NFA position decreased 0.5 percent in July after contracting by 0.6 percent in the previous month. Similarly, the NFA of banks declined due to a contraction in interbank loans receivable and deposits maintained with nonresident banks.
Ricafort said the single-digit growth in domestic liquidity could still continue, especially after the cut in banks’ reserve requirement on June 30, 2023.