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M3 rise slower in Jan as bank lending dips

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M3 rise slower in Jan as bank lending dips

The expansion in the country’s money supply eased in January as bank lending continued to decline, the Bangko Sentral ng Pilipinas (BSP) reported on Tuesday.

In a statement, the central bank said domestic liquidity (M3) rose by 9 percent year-on-year to P14 trillion in the first month, slower than the 9.5-percent increase in December. Month-on-month and seasonally adjusted, M3 inched up by 0.7 percent.

Domestic claims grew by 5 percent in January from a year earlier, faster than the revised 4.5-percent jump a month ago, which was “attributed mainly to increase in net claims on the national government, even as bank lending activity remained weak,” it explained.

“Loans for production activities contracted as lending to a number of key sectors declined, specifically for wholesale and retail trade and repair of motor vehicles and motorcycles; manufacturing; and financial and insurance activities,” the BSP said.

It added that “consumer lending contracted due to the decline in credit card and motor vehicle loans as well as the slowdown in salary-based consumption loans.”

Net claims by the government increased by 39 percent in January, quicker than December’s adjusted 31.1-percent climb.

Meanwhile, bank lending fell by 2.4 percent, faster than the 0.7-percent pickup a month earlier. The figure represented its quickest slide since August 2006’s 2.9-percent drop.

Month-on-month and seasonally adjusted, commercial bank loans dipped by 0.3 percent.

Loans to residents, net of reverse repurchase, decreased by 1.7 percent, while outstanding loans to nonresidents also declined by 21.6 percent.

“In general, credit activity remained soft due to weak demand as banks continued to be risk-averse on concerns over asset quality and profitability” the central bank explained.

Lending for production activities eased faster by 1.1 percent, compared to December’s 0.4-percent fall, as outstanding loans to these sectors continued to dive: wholesale and retail trade and repair of motor vehicles and motorcycles (-6.9 percent); manufacturing (-7.4 percent); and financial and insurance activities (-6.3 percent).

“However, the contraction was tempered by [the] sustained growth in loans to some major production sectors, specifically to real estate activities (5.7 percent), transportation and storage (6.6 percent), construction (4.3 percent), and electricity, gas, steam, and air conditioning supply (3.5 percent),” the BSP said.

Loans to other sectors saw smaller upticks, it added, after some activities resumed, especially those of human health and social work (11.0 percent), and accommodation and food services (4.0 percent).

Despite this, universal and commercial bank loans to consumers contracted by 6.9 percent after climbing by 4.1 percent in December on account of “the decline in credit card and motor vehicle loans, as well as the slowdown in salary-based consumption loans during the month.”