ING Bank Manila senior economist Nicholas Mapa
MANILA – The contraction in bank lending, which posted its first after over a decade, is expected to continue in the next months due to the pandemic.
Citing Bangko Sentral ng Pilipinas (BSP) data released Wednesday, ING Bank Manila senior economist Nicholas Mapa, in a report, said the 0.7-percent contraction in outstanding loans of universal and commercial banks (U/KBs) in December 2020, which excludes placements in BSP’s reverse repurchase (RRP) facility, is the first time since July 2008 or during the global financial crisis.
The contraction follows the 0.5-percent rise in bank lending last November.
Mapa said the drop in bank lending affected the growth of domestic liquidity or M3 after this slowed to 9.5 percent last December.
“With non-performing loans on the rise and the job market in shambles, we can expect bank lending to remain in contraction for the next couple of months as both consumer and corporate demand may be subdued given our economic outlook,” he said.
And since bank lending posted a negative print in the last month of 2020, Mapa expects sustained weakness on domestic expansion.
Similar to projections of economic managers on the possible return of the domestic economy’s pre-pandemic level expansion, Mapa forecasts this to happen in “2022 or early 2023 with capital formation impaired by floundering consumer and business sentiment.” (PNA)
