Bank loans declined for the first time in December from a year ago, despite the record-low interest rates, as the economy continued to bear the impact of the pandemic, data from the Bangko Sentral ng Pilipinas showed Wednesday.
The BSP said outstanding loans of universal and commercial banks, net of reverse repurchase placements with the BSP, fell 0.7 percent in December, after increasing by 0.5 percent in November.
It said outstanding universal and commercial bank loans, net of RRPs, was broadly steady at about 0.1 percent on a month-on-month seasonally-adjusted basis.
Loans were rising at double-digit rates prior to the onset of pandemic in March 2020, but sluggish economic activities took their toll on large conglomerates and small and medium enterprises. The Philippine Statistics Authority reported the gross domestic product contracted 8.3 percent in the fourth quarter and 9.5 percent in the whole of 2020.
President Rodrigo Duterte said the economy was “sinking deeper and deeper” and losing about P2 billion a day because of the restrictions meant to curb the spread of the coronavirus disease 2019.
“The workers, the Filipino workers would have earned that money if our economy was moving. So, we are sinking deeper and deeper, but not just us. If it’s not us, it’s everyone. But we [in government] are trying our very best to keep us afloat,” Duterte said in Filipino.
The BSP slashed the overnight borrowing rate by a total of 200 basis points last year that brought it to a record-low of 2 percent as support measure to boost the economy amid the lingering global health crisis.
The interest rates on the overnight deposit and lending facilities were also at an all-time low of 1.5 percent and 2.5 percent, respectively.
Data showed that despite the rate reduction, lending remained tepid as banks continued to be risk-averse amid the ongoing pandemic.
Outstanding loans to key sectors continued to decrease, especially to wholesale and retail trade and repair of motor vehicles and motorcycles (-6.8 percent), manufacturing (-5.2 percent) and financial and insurance activities (-4.6 percent).
Loans to some major production sectors expanded, particularly to real estate activities (5.3 percent), electricity, gas, steam, and air conditioning supply (3.8 percent), human health and social work activities (49.2 percent), information and communication (5.3 percent) and transportation and storage (5.0 percent).
Meanwhile, domestic liquidity or the money supply circulating in the financial system slowed in December compared to November, amid the prolonged impact of the pandemic.
Liquidity grew by 9.5 percent year-on-year to about P14.2 trillion in December, slower than the the 10.5-percent expansion in November. On a month-on-month seasonally-adjusted basis, domestic liquidity—also called M3—increased by 0.7 percent
“Domestic claims grew by 4.7 percent year-on-year in December from 6.7 percent in the previous month amid tepid bank lending activity. Loans for production activities contracted as lending to key industries eased, specifically for wholesale and retail trade and repair of motor vehicles and motorcycles; manufacturing; and financial and insurance activities,” the BSP said.
Consumer lending expanded at a slower rate due to the slowdown in credit card loans, motor vehicle loans and salary-based consumption loans.
Net claims on the central government increased 31.8 percent in December from 40.7 percent in the previous month due in part to the sustained borrowings by the national government.
Net foreign assets in peso terms grew by 25.2 percent year-on-year in December, faster than the 22.9-percent growth in November.
“The expansion in the BSP’s NFA position reflected the increase in the country’s gross international reserves during the month,” it said.
Meanwhile, the NFA of banks rose, albeit at a slower pace relative to the previous month, as growth in banks’ foreign assets eased on account of lower loans and investments in marketable securities.
“The overall stance of monetary policy is expected to remain accommodative while economic recovery gets underway. At the same time, the BSP stands ready to deploy further monetary policy measures as necessary in order to ensure adequate support to economic activity while maintaining price and financial stability,” the BSP said.