Bank lending net of banks' reverse repurchase (RRP) placements with the BSP grew by 8.7 percent in July, albeit slower compared to the 14.3 percent expansion in the previous month. Outstanding loans of commercial banks, including RRPs, also grew by 2.9 percent from 11.1 percent in the previous month, to reach P2.1 trillion at end-July 2009. On a month-on-month seasonally-adjusted basis, commercial banks' lending declined by 5.5 percent (for loans inclusive of RRPs) and 3.1 percent (net of RRPs) in July.
Growth in loans for production activities moderated to 8.1 percent in July from 14.4 percent in the previous month. Production loans continued to contribute significantly to the expansion in total bank lending, even as lending to most sectors either slowed down or contracted. Meanwhile, consumption loans expanded at a slightly faster rate of 8.2 percent from 7.2 percent in the previous month, following the marked rise in auto loans and the continued growth in credit card lending.
Among the production sectors, lending to transport, storage, and communications recorded the highest growth rate at 61.8 percent. It was also the largest contributor to the growth of lending to production sectors. Other sectors that registered double-digit growth rates were wholesale and retail trade (14.4 percent), public administration and defense (15.2 percent), and other community, social, and personal services (19.2 percent). The following productive sectors were also major contributors to lending growth, even as lending to these sectors reflected some slowdown: real estate, renting and business services (19.5 percent); agriculture, hunting, and forestry (17.7 percent); electricity, gas and water (23.7 percent); financial intermediation (10.6 percent); hotels and restaurants (40.3 percent); and health and social work (33.1 percent). Meanwhile, bank lending to manufacturing, construction, mining and quarrying and education sectors registered contractions during the month. Manufacturing loans, which accounted for 14.1 percent of total loans, continued to contract at 26.8 percent, reflecting, in part, the impact of reduced global demand for exports. Construction loans also continued to decline at 18.7 percent, influenced by weak demand for housing and new office spaces.
BSP Governor Amando M. Tetangco, Jr. noted that even as year-on-year bank lending slowed, credit growth remained positive and continued to be directed towards the productive sectors of the economy. He said that the BSP remains committed to provide the appropriate monetary conditions for continued credit expansion, while remaining mindful of its primary mandate of maintaining price stability.