Growth in private sector loans moderated in September quarter

Growth in private sector loans moderated in September quarter

BY DURRANT PATE
Observer business writer

Sunday, November 22, 2020

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There has been a slowdown in the growth of loans to the private sector based on the latest assessment by the Bank of Jamaica (BOJ), which regulates the local financial sector.

In its latest assessment, the BOJ reports that loans and advances to the sector have moderated during the September quarter relative to the previous quarter in June. Loans and advances, including domestic and foreign currency denominated loans, to the non-financial private sector by deposit-taking institutions expanded by 12.2 per cent at September 2020.

This was below the growth of 13.3 per cent recorded as at June 2020. This growth was underpinned by expansions in loans and advances of 15.7 per cent and 9.6 per cent to the productive sector and individuals, respectively.

The BOJ Quarterly Monetary Policy report, which was released yesterday, showed that the growth in loans to the productive sector was mainly attributed to growth in loans to the tourism, construction & land development and other professional industries. The growth in private sector credit is expected to be in line with previous projections over the next eight quarters.

PRIVATE SECTOR CREDIT TO CONTINUE GROWING

Private sector credit is projected to grow at an average rate of 4.9 per cent up to September 2022, unchanged compared to the previous forecasted expansion. This projection remains in line with expectations of a continued fallout in demand.

However, the figure remains unchanged in light of growth in credit to some industries over the September 2020 quarter. In the meantime, loan rates were largely reflective of the buoyant liquidity conditions.

As a result of this buoyancy, there was a general decline in money market rates during the September 2020 quarter, relative to the preceding quarter. When compared to the rates at end of June 2020, overnight interbank rates were lower by 27 basis points (bps), while overnight rate and 30-day private money market rates were higher by 1 bp and 14 bps respectively.

Likewise, the yields on Government of Jamaica 90-day instrument were 14 bps lower, 180-day security, down 3 bps and 270-day Treasury bills rate, down 18 bps at end of September 2020.

Basis points refer to a common unit of measure for interest rates and other percentages in finance.


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