RCBC chief economist Michael Ricafort
MANILA – The rollout of coronavirus disease (Covid-19) vaccine program is expected to increase chances of further reopening the domestic economy and support bank lending amidst its continued slowdown as of last January due to the pandemic.
Data released by the Bangko Sentral ng Pilipinas (BSP) on Tuesday showed a deeper year-on-year contraction in bank lending, excluding those placed by banks in the central bank’s overnight reverse repurchase (RRP) facility, of -2.4 percent from month-ago’s -0.7 percent.
In a report, Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort said the latest bank lending figure for universal and commercial banks (U/KBs) is the weakest in more than 14 years, or since August 2006.
Ricafort said this development is “consistent with slower business/economic conditions, in view of the GDP (gross domestic product) contraction of -9.5 percent in 2020 and -8.5 percent in fourth-quarter 2020 largely brought about by the Covid-19 lockdowns/pandemic.”
“The latest -2.4 percent contraction in bank loans data (is) also consistent with expectations/estimates of low single-digit year-on-year contraction in 1Q (first quarter) 2021 GDP (partly due to higher base/denominator a year ago, shortly before the Covid-19 pandemic/lockdowns),” he said.
Ricafort said bank lending growth “has always been much faster, by about 7-10 percentage points, vis-a-vis GDP growth) for many years/decades.”
In the coming months, he said further easing of quarantine restrictions is seen to boost bank lending since this will result in more active economic activities thus, a pick-up in loan demand.
“Any pick up in imports, manufacturing, and other business/economic activities would also lead to some pick up in loan demand,” Ricafort said.
The low interest rate environment, which is a result of the 200 basis points reduction in BSP’s key policy rates last year, is also projected to entice borrowers to take out loans, he said.
He added additional infrastructure spending by the government is also forecast to help lift bank lending since this has higher multiplier effects on the economy. (PNA)
