Construction, financial activities lift bank lending in July —BSP

Bank lending continued to expand in July, led by construction and financial activities, data released by the Bangko Sentral ng Pilipinas (BSP) showed Friday.

Outstanding loans, excluding overnight borrowing by banks with the central bank, grew by 19.6 percent last month from 19.1 percent in June.

Including central bank lending, bank lending increased by 18.7 percent from 17.7 percent.

Central bank lending, or reverse repurchase, allows banks to sell government security to the BSP with a commitment to sell it back at a specified date and at a predetermined rate.

“This tells us that economic activity is continuing to expand in spite of rising prices,” Union Bank of the Philippines chief economist Ruben Carlo Asuncion told GMA News Online.

“It may also mean that recent monetary tweaks have yet to impact lending,” Asuncion said.

The BSP’s policy-setting Monetary Board has raised key policy rates for a cumulative total of 100 basis points so far this year to counter as inflationary pressures. The central bank adjusted rates by 50 basis points in August and 25 basis points each in June and July.

The BSP noted that loans for production activities—which comprised 88.6 percent of banks' aggregate loan portfolio, net of RRP—increased by 19.7 percent in July from 19.2 percent in June.

Production loans were driven by lending to the following economic activities:

• real estate +15.9 percent

• construction, +37.6 percent

• manufacturing, +19.0 percent

• financial and insurance activities, +35.9 percent

• electricity, gas, steam and air conditioning supply, +9.7 percent

• wholesale and retail trade, repair of motor vehicles and motorcycles, +25.6 percent

However, bank lending decreased by 7.1 percent in agriculture, forestry and fishing, and by 52.1 percent in administrative and support services.

Household consumption loans declined by 16.9 percent in July.

The contraction in salary-based general purpose consumption loans and other types of household loans, as well as the slower growth in motor vehicle loans, helped offset the expansion in credit card loans in July, according to the central bank.

“The BSP will continue to ensure that the expansion in domestic credit and liquidity proceeds in line with overall economic growth while remaining consistent with the BSP’s price and financial stability objectives,” it said. —VDS, GMA News