Rate adjustments spur slow growth in May loans–BSP

LOANS extended to both residents and for production slowed in May compared to April due to policy rate adjustments, according to preliminary data from the Bangko Sentral ng Pilipinas (BSP).

By Cai U. Ordinario @caiordinario

THE country’s domestic liquidity (M3) grew by 6.6 percent year-on-year in May 2023, according to the Bangko Sentral ng Pilipinas (BSP).

The data showed the country’s M3 increased to P16.28 trillion in May 2023 from P15.277 trillion in May 2022 and P16.26 trillion in April 2023.

The BSP said the growth rate posted by M3 in May 2023 was the same year-on-year increase posted in April 2023. On a monthon-month seasonally-adjusted basis, M3 increased by about 0.3 percent. “Looking ahead, the BSP will continue to ensure that domestic liquidity conditions remain consistent with the BSP’s price and financial stability objectives,” BSP said. Data showed that domestic claims rose by 11.4 percent yearon-year in May from 11.9 percent in the previous month.

Claims on the private sector grew by 9.3 percent in May from 9.8 percent (revised) in April, driven by the sustained expansion in bank lending to non-financial private corporations and households.

Net claims on the central government also expanded by 18.3 percent in May from 20.2 percent (revised) in April owing mainly to the borrowings by the National Government.

Net foreign assets (NFA) in peso terms grew by 2.7 percent year-on-year in May following the 0.2-percent contraction in April.

The BSP’s NFA position expanded by 4.2 percent in May after increasing by 2.5 percent in the previous month. However, the NFA of banks declined on account of higher bills payable. M3 may also be derived as Net Foreign Assets + Domestic Claims, net of Liabilities excluded from broad money and transferable and other deposits in foreign currency (FCDs-Residents).

BSP said resident loans slowed to 9.3 percent in May from 9.6 percent in April while production loans slowed to 7.9 percent in May from 8.3 percent in April.

Loans extended to residents reached P10.59 trillion in May 2023 from P10.547 trillion in April 2023 while loans for production reached

P9.498 trillion in May from P9.471 trillion in April this year.

“The moderation in bank lending activity reflects the impact of the BSP’s cumulative policy rate adjustments. Looking ahead, the BSP will continue to ensure that domestic liquidity and credit dynamics are in line with its price and financial sta- bility mandates,” BSP said.

Compared to May 2022, loans to residents increased from P9.69 trillion while loans for production increased from P8.8 trillion.

BSP said consumer loans to residents grew at a slightly faster rate of 22.7 percent in May from 22.3 percent in April due to the increase in credit card, motor vehicle, and salary loans.

Outstanding loans to non-residents also went up by 13.2 percent in May from 12.2 percent in the previous month. These include loans by universal and commercial banks (UKBs) foreign currency deposit units (FCDUs) to non-residents.

For production loans, BSP data showed the growth was mainly due to the continued increase in loans to major industries, specifically electricity, gas, steam, and air conditioning supply (14.1 percent). This was followed by real estate activities (5.5 percent); wholesale and retail trade, and repair of motor vehicles and motorcycles (8.6 percent); information and communication (15.9 percent); and financial and insurance activities (7.3 percent).Meanwhile, BSP said outstanding loans of UKBs, net of reverse repurchase (RRP) placements with the BSP, slowed to 9.4 percent year-on-year in May 2023 from 9.7 percent in April.

On a month-on-month seasonally-adjusted basis, outstanding universal and commercial bank loans, net of RRPs, increased by 0.7 percent.

Cai U. Ordinario