Economist concerned about slowing loan growth

An economist said Thursday that the slowdown in bank lending in September was a sign that investment momentum is fading and will affect how the economy will recover from the impact of the global pandemic. ING Bank Manila senior economist Nicholas Mapa was responding to the latest data from the Bangko Sentral ng Pilipinas that showed bank loan growth slowed to 2.8 percent in September from 4.7 percent in August. . “The slowdown in bank lending reflects current trends reported in GDP figures with capital formation plummeting as both businesses and corporations hold back on significant investments to wait for the storm to pass. These trends are also reflected in import figures, which show substantial declines for capital goods and durable equipment, as investors are shy about making big bets given the economic recession, ”Mapa said in a report. He said the government appeared “shy to spend big” and that public spending is expected to trend downward by the end of 2020. “With investment momentum waning, the economy will lack its two main key sectors. in the coming quarters, which does not bode well for future growth prospects, ”Mapa said. Mapa said that despite BSP’s efforts to implement a combination of conventional and unconventional easing measures to support the recovery (low interest rates, presence in the bond market and abundant liquidity), bank loans did not respond to aggressive episodes of easing. “From here, we can only hope that the downward trends in loans in most sectors, households hit single digits soon and overall lending is closer to zero with the pandemic economy, “he said.” It looks like for now, c With the economic recovery uncertain, bank lending and investment activity in general will be frozen, no matter what BSP pulls out of its proverbial deep set of tools, “he said. Data from the BSP showed that the growth of outstanding loans from universal and commercial banks, net of reverse repurchase placements with the BSP, slowed to 2.8 percent in September from 4.7 percent in August. The BSP said that on a seasonally adjusted month-over-month basis, outstanding commercial and universal bank loans, net of PVR, declined 1 percent. The BSP said the overall decline in bank loan growth partly reflected banks’ lower tolerance for risk, declining demand for loans due, in turn, to weak business and income prospects, and the change observed by non-financial companies towards alternative sources of funds. Loans for productive activities, net of RRP, grew 2.4 percent in September from 4.1 percent in August, as loans in most sectors slowed during the month. Loans outstanding to key sectors also continued to contract, particularly in manufacturing (-2.6 percent), as well as in wholesale and retail trade and repair of motor vehicles and motorcycles (-3.4 percent). Meanwhile, the following sectors contributed to the overall growth in production loans: real estate activities (7.3 percent); information and communication (9.7 percent); supply of electricity, gas, steam and air conditioning (3.0 percent). Lending to homes expanded at a lower rate of 10.2 percent in September from 12.9 percent in August, mainly due to the continued slowdown in credit card and motor vehicle loans during the month. The economy contracted 11.5 percent in the third quarter due to the prolonged impact of the pandemic. The figure, however, was an improvement from the deeper contraction of 16.5 percent in the second quarter. This brought average GDP in the first three quarters to -10 percent.