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CASH circulating in the local economic stream, as well as banking credit activity, registered moderate growth figures in September, indicating a moderate economic climate in the country during the period.
The latest figures from the Bangko Sentral ng Pilipinas (BSP) showed that domestic liquidity, measured broadly as “M3”, grew 12.3 percent to P13.5 trillion in September. This is slower than the 13.7 percent growth seen in the previous month.
A growing supply of cash is often beneficial to an expanding economy like the Philippines, as it provides fuel for the country’s productive sectors.
However, excessively slow growth in M3 could be detrimental to the overall growth of the country, especially if it is not enough to boost productive activities.
Bank loans, one of the main drivers of domestic liquidity, grew 2.8 percent in September, weaker than the 4.7 percent in August. The BSP said that the overall decline in bank growth partly reflects banks’ lower tolerance for risk, declining demand for loans due, in turn, to weak business and income prospects, and observed change by companies. non-financial to alternative sources of funds.
Loans for production activities also skyrocketed to 2.4 percent during the month. Broken down, most sectors showed a slowdown in loans received.
Outstanding loans to key sectors also continued to contract, particularly in manufacturing, which contracted by 2.6 percent, as well as wholesale and retail trade and repair of motor vehicles and motorcycles, which contracted by 3, 4 percent.
Meanwhile, the following sectors contributed to the overall growth in production loans: real estate activities grew 7.3 percent; information and communication grew 9.7 percent; the supply of electricity, gas, steam and air conditioning grew 3 percent; and transportation and storage grew 8.4 percent.
Loans for human health and social work activities were the ones that grew the most with 44.5 percent during the month.
Similarly, home loans expanded at a slower rate of 10.2 percent in September from 12.9 percent in August, primarily due to the continued slowdown in credit card and motor vehicle loans during the month. .
Decrease in capital formation
ING Bank Manila senior economist Nicholas Antonio Mapa said that the slowdown in bank lending reflects the decline in capital formation as seen in the recent announcement of the country’s GDP impression.
“The slowdown in bank lending reflects current trends reported yesterday in GDP figures with capital formation stalling as businesses and corporations alike withhold important investments to wait for the storm to pass. These trends are also reflected in the import figures, which show substantial drops for capital goods and durable equipment, as investors are shy about making big bets given the economic recession, “he said.
“Unfortunately, even the government seems shy to spend big and public spending is expected to trend down by the end of 2020. With the investment momentum waning, the economy will lack its two main key sectors in the next few quarters, which does not bode well for future growth prospects, ”he added.
Expect further slowdown
In Mapa’s view, the fact that the country’s bank loan rate is still slowing despite BSP’s efforts points to a continued trend in the coming months.
“BSP has been busy in recent weeks, implementing a powerful combination of conventional and unconventional relaxation measures to support recovery. Despite all these efforts, low interest rates, presence in the bond market and abundant liquidity, it seems that monetary policy has followed its course and bank loans have not responded to these aggressive easing attacks, “said Mapa.
