Philippine annual loan growth fell to its slowest pace in nearly a year in May as central bank efforts to stoke credit were tripped up by the special deposit accounts it offered widely in a bid to cool money supply growth.
The central bank said on Monday that banks' outstanding loans rose just 3.6 percent in May from a year earlier, braking from the previous month's 12 percent expansion and the weakest annual growth since 1.3 percent in June 2006.
The monetary authority, which has been trying to boost credit growth since November, said the deceleration in lending was due to banks opting to park money in the central bank's special deposit accounts (SDAs).
The central bank widened the availability of its SDAs to banks' trust departments in May and encouraged greater use of the accounts in an attempt to cool red-hot annual money supply growth, which has been over 20 percent since December due to foreign inflows. The central bank dismantled this tiered interest rate scheme last week, saying credit growth was improving. It also slashed its main overnight borrowing rate by 150 basis points to 6 percent to lessen the impact. Annual money supply growth eased to 21 percent in May from a peak of 26 percent in April due to greater use of the SDAs.