Growth of money supply, bank loans softened in June

Domestic liquidity and bank loans grew at a slower pace in June, compared to the previous month, reflecting the subdued economic activities following the imposition of quarantine measures to contain the COVID-19 pandemic.

Domestic liquidity or the money supply circulating in the financial system grew by 14.9 percent year-on-year to about P13.6 trillion in June, slower than the revised 16.7-percent expansion in May, the Bangko Sentral ng Pilipinas said Friday.

It said that on a month-on-month seasonally-adjusted basis, domestic liquidity decreased by 1.1 percent.

“Demand for credit remained the principal driver of money supply growth, with domestic claims rising by 13.3 percent year-on-year in June from 16.2 percent in May. Net borrowings by the central government grew by 53 percent in June from 59.7 percent [revised] in the previous month, reflecting in part the government’s higher funding requirement to fight the COVID-19 pandemic,” it said.

“Claims on the private sector, driven mainly by bank lending to non-financial corporations and households, also expanded at a slower pace during the month due to constrained economic activity and weak business prospects,” it said.

Meanwhile, the growth in loans for household consumption also eased on slower expansion in credit card, motor vehicle, and salary-based general consumption loans during the month.

Meanwhile, net foreign assets in peso terms expanded by 15.3 percent year-on-year in June, faster than the 12.1 percent growth in May. The BSP’s NFA position continued to expand, reflecting the increase in gross international reserves.

The growth in the NFA of banks accelerated, as banks’ foreign assets rose on account of higher interbank loans, deposits with other banks and investments in marketable debt securities.

The BSP said it would remain vigilant in monitoring domestic liquidity and credit dynamics as economic activity gradually resumes.

“The BSP stands ready to deploy appropriate measures as needed to ensure that liquidity and credit remain adequate to support domestic demand amid the ongoing health crisis,” it said.

Meanwhile, bank lending also slowed down in June with to the implementation of community quarantines that impacted economic activity during the month.

Data showed that outstanding loans of universal and commercial banks, net of reverse repurchase placements with the BSP, expanded by 9.6 percent in June, slower than the 11.3-percent growth in May. On a month-on-month seasonally-adjusted basis, commercial bank loans net of RRPs decreased by 1.1 percent.

“The slowdown in bank lending reflects in part the weak domestic economic prospects and constrained economic activity following the imposition of quarantine measures to contain the COVID-19 outbreak,” the BSP said.

Loans for production activities, net of RRPs, grew by 8.3 percent in June, slower than 9.8 percent in the previous month.

The continued growth in production loans was driven by lending to the following sectors: real estate activities (16.8 percent); financial and insurance activities (10.6 percent); information and communication (23.7 percent); electricity, gas, steam and air conditioning supply (5.4 percent); and transportation and storage (11.0 percent).

Bank lending to other sectors also increased during the month, except for mining and quarrying (-2.8 percent), professional, scientific and technical services (-5.5 percent) and manufacturing (-0.7 percent).

Loans for consumption of households, still reeling from the partial mobility restrictions and weak consumer confidence, grew at a slower pace of 26.7 percent in June from 30.2 percent in May, following the slowdown in credit card, motor vehicle and salary-based general purpose consumption loans during the month.

Topics: domestic liquidity , COVID-19 pandemic , Bangko Sentral ng Pilipinas
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