Bank lending, excluding banks’ reverse repurchase (RRP) placements with the BSP, continued to grow in March, albeit at a slower pace of 5.0 percent from the previous month’s expansion of 6.1 percent. Outstanding loans of commercial banks including RRPs, however declined by 0.9 percent in March, due to the decline in banks’ RRP placements with the BSP. On a month-on-month seasonally-adjusted basis, commercial banks’ lending decreased by 0.4 percent for loans net of RRPs, and by 3.1 percent for loans inclusive of RRPs.
The growth of loans for production activities—which comprise around 84 percent of banks’ total loan portfolio—decelerated to 4.9 percent in March from 5.8 percent a month ago. This developed as credit growth in most sectors led by real estate, renting, and business services, was pulled down by the contraction in other sectors such as manufacturing. Loans for household consumption continued to rise although at a slow pace, particularly for credit card and auto loans.
In particular, the growth of production loans was due to the expansion in the borrowings of the following sectors: real estate, renting and business services (18.1 percent); transportation, storage, and communication (25.8 percent); and wholesale and retail trade (12.7 percent). Lending to agriculture, hunting and forestry also increased by 2.6 percent; while construction loans rebounded to 7.1 percent, a sharp turnaround from the 11 months of continuous decline, as new residential projects were launched. Meanwhile, the contraction in manufacturing (which declined by 9.9 percent) eased to single-digit levels since February, with the recovery in global trade. Other sectors which posted a contraction in lending growth to production activities were: financial intermediation (-5.8 percent), and other community, social and personal services (-22.1 percent).
BSP Governor Amando M. Tetangco, Jr. noted that improving economic prospects and stable financial conditions supported the sustained credit expansion in the first quarter. He also pointed out that the still-favorable credit growth, along with the expansion in the bond and equity markets during the quarter, could indicate a sustained pick-up in economic activity. He stressed that the BSP will continue to provide the appropriate credit environment so that economic recovery can proceed smoothly. Going forward, the BSP will continue to watch closely evolving credit and liquidity conditions with a view to ensuring that ample liquidity is available to maintain the momentum of demand at a reasonable pace while containing inflation pressures.