Private sector credit growth continues in Sept.

• CB says preliminary estimates suggest healthy expansion of private credit during Sept.
• Private credit staged recovery in August with an increase of Rs.78.3bn after remaining weak till July

Preliminary estimates have shown that growth in private sector credit that recovered in August had continued unabated in September.

Private sector credit, which remained relatively weak till July since April, staged a recovery in August with an increase of Rs.78.3 billion and the Central Bank said the record had been healthy even through the end of September. 

This marked an acceleration of private sector credit growth to 5.2 percent in August on year-on-year basis from 4.3 percent recorded in the whole of 2019, one of the lowest in the recent history. 

“Preliminary estimates suggest a healthy expansion of credit to the private sector during the month of September 2020 as well,” the Central Bank said in a report on economic highlights of 2020 through mid-October and prospects for 2021. 

Total outstanding private sector credit from May through July recorded a negative growth although gross disbursements of loans by the banking sector reached pre-pandemic highs towards mid-July. 

As a result, during the first eight months of the year, the banking sector had in total extended Rs.110.6 billion in private sector credit. 

The September private credit data would be out in a few weeks.

Private sector credit is an important gauge that measures the dynamism of a country’s private actors as they borrow for both investment and consumption. The earnings reports for the September quarter show that the economy regained most of the lost ground during the third quarter with consumer and industrial stocks reporting some strong top and bottom line numbers. 

Meanwhile, the growth of money supply measured through broad money growth (M2b) continued to accelerate during the first eight months driven by the growth in net domestic assets of the banking system, mainly due to the notable expansion of credit to the public sector. 

As a result, on a YoY basis, the M2b growth accelerated to 17.5 percent by end- August from 7.0 percent by the end of 2019.