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NEWS UPDATES 4 July 2009

Philippines’ bank lending slows amid expanding money supply

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Bank lending in the Philippines slowed further in May even as the growth of money in the local financial system picked up pace, the Manila Times reported.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said the industry’s outstanding loans, including their reverse repurchase agreements (RRPs), grew by 10.2 percent to 2.132 trillion peso in May, or slower than the 13.4 percent expansion in April.

Excluding their overnight placements with the BSP, banks’ loans also decelerated to 17.3 percent in May from 19 percent the month before. The BSP blamed the slowdown on weak demand from producers and households.

Monetary authorities earlier said the economic slowdown will take its toll on bank lending. Loans for production activities expanded year-on-year by 17.1 percent in May, lower than the 18.1 percent in April.

Borrowings by firms in the agriculture, hunting and forestry; electricity, gas, and water; real estate; financial intermediation; and transportation, storage and communication sectors rose by double-digits, but those by companies in the community, social and personal services; public administration and defense; health and social work; wholesale and retail trade; and fishing, mining and quarrying grew at a slower pace.

Bank lending to manufacturing, education and construction sectors however contracted. On the household front, consumption loans likewise decelerated sharply to 9.6 percent in May from 13.5 percent in April.

Total consumption loans reached 159.44 billion peso in May from 155.927 billion peso in April. This was driven by slower growth in credit card and auto loans. Credit card loans grew by 6.9 percent to 104.165 billion peso in May.

Auto loans, meanwhile, posted a slower increase of 48.2 percent to 38.341 billion peso in May.

Despite the general slowdown in bank lending, domestic liquidity or M3 picked up pace, with the country’s money supply growing 15 percent in May from the 13.7 percent the month before.

The BSP said the robust expansion in net foreign assets—a 19.8 percent expansion—continued to drive liquidity growth.


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