Manila: Bank lending growth in the Philippines decelerated in June, indicating cautious borrowing by firms and subdued consumer demand, while domestic liquidity also showed signs of easing, according to the Bangko Sentral ng Pilipinas (BSP).
According to Philippines News Agency, data released on Friday revealed that loans from universal and commercial banks (U/KBs) increased by 9.8 percent in June. This marks a slowdown from the 12.1 percent growth observed in May. The total outstanding loans issued by U/KBs during the month amounted to PHP14.88 trillion. Business activity loans rose by 9.2 percent, fueled by ongoing lending to crucial sectors such as real estate, electricity, gas, steam, air-conditioning supply, wholesale and retail trade, repair of motor vehicles and motorcycles, manufacturing, transportation and storage, and agriculture, forestry, and fishing.
However, the central bank noted that the growth in June was slower than the 11.7 percent expansion seen in May, highlighting reduced loan growth in several major borrowing sectors, especially construction, education, and other service activities. Consumer loans also slowed to 17.8 percent from 19 percent in May, primarily due to a decrease in credit card and motor vehicle loan growth, indicating a more cautious approach to household borrowing.
The BSP emphasized the importance of monitoring bank loans as they serve as a crucial transmission channel for monetary policy. In a Viber message, Jonathan Ravelas, a senior adviser at Reyes Tacandong and Co., stated that the moderation in bank lending growth suggests increased caution among both businesses and consumers when considering new debt. He observed that companies are adopting a wait-and-see approach amid global uncertainties, prioritizing cash flow management and operational efficiency over aggressive expansion.
Ravelas added that despite easing inflation, many households remain vigilant about their finances, focusing on essential spending rather than new borrowing. He noted that lending growth, while moderated, remains healthy and positive, indicating ongoing economic expansion but at a more measured and sustainable pace.
Meanwhile, domestic liquidity (M3) rose by 10.6 percent to PHP20.5 trillion in June, continuing to support economic activities. However, this growth was slower than the 12.8 percent recorded in May, reflecting a deceleration in credit activity. M3, a broad measure of money supply, encompasses currency in circulation, bank deposits, and other financial assets easily convertible to cash.
The main drivers of M3 growth were borrowings by both private and public sectors. Bank lending continued to support production sectors and households, while the National Government's issuance of debt securities and withdrawal of deposits from the BSP and banks for financing spending also contributed to domestic liquidity growth. Additionally, higher net foreign assets (NFAs) played a role in the expansion of M3. NFAs represent the difference between depository corporations' claims on and liabilities to nonresidents. The BSP's NFA grew by 6.1 percent, while banks' NFA contracted due to increased foreign-exchange-denominated bills payable compared to the same period last year.
The BSP affirmed its commitment to ensuring that domestic liquidity conditions remain aligned with its price and financial stability objectives.
