Metro Manila (CNN Philippines, July 1) — Bank lending declined at a milder pace in May, data from the Bangko Sentral ng Pilipinas shows.
The BSP on Wednesday said that outstanding loans of universal and commercial banks stood at ₱9.01 trillion in May, a 4% fall from the ₱9.38 trillion tallied during the same month last year. This marks the sixth straight month of decline for bank lending.
The drop is softer than the 5% nosedive recorded in April, wherein total lending fell from ₱9.47 trillion to ₱8.99 trillion.
“Credit activity has remained muted as the emergence of new coronavirus variants and the continued risk of infection dampen prospects for economic recovery,” said the central bank.
Loans to residents and non-residents contracted by 3.5% and 18.8%, respectively, easing slightly from plunges of 4.5% and 20.2% in April.
In terms of industry, the professional, scientific and technical services subsector suffered the worst fall in loans at 56.9%. This is followed by administrative and support services at -30.9%. Education, mining and quarrying also saw loans go down along with wholesale and retail trade of motor vehicles.
Meanwhile, lending for human health and social work activities surged to 13.7% during the month. Real estate alongside financial and insurance activities saw loans go up by 3.9% and 3.4%, respectively.
In a note to reporters on Thursday, ING Bank Manila senior economist Nicholas Mapa said the softer decline in bank lending observed in May suggests the BSP’s rate cuts late last year are “beginning to take hold.”
“BSP indicates that policy moves tend to operate with a 6-9 month lag and we could see the early signs of these accommodative moves feeding through to the economy,” he said.
With this, Mapa expects bank loans to still contract in the months ahead but eventually expand by the fourth quarter of 2021 with the fading of base effects and improvement in economic activity.
