Impact of the pandemic on the demand and supply of bank loans

The risk of default of the credits for the deterioration of purchasing power de people, caused by stoppage of economic activity, caused the banking system will implement a moratorium of 3 months.

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Later, the Government formalized this financial relief with the promulgation of Law 156 of 2020, which establishes a moratorium until December 31, 2020, which was extended 6 more months, until June 2021 for loans granted by banks, cooperatives and financial entities, both public and private.

This law establishes that during its validity entities may not carry out charges or surcharges by failure to pay arrears, nor increase interest rates, guarantees and credit references will not be affected of the modified loans, which may include from the granting of grace periods, loan maturity extensions and adjustments to the letter o monthly fee, applicable to workers, natural or legal persons which have been affected by the pandemic by the COVID-19.

The banking sector faces a reduction in its income which puts pressure on liquidity and hence, affects your ability to lend. According to Superintendency of Banks of Panama, January to March 2020 the disbursement of new loans increased reaching $ 2,130 million, a figure that contrasts with the drop of 62.5% in the month of April what coincide with the mobility restrictions and closure of the economyHowever, a recovery has been observed since June due to the gradual reactivation of certain sectors. Then, in the month of September an improvement is evident, since $ 1,186 million in new loans were placed.

It is rebound in loans to the commercial, mortgage, industrial and personal consumption sectors, gives positive signals, since, by allowing the openness in different sectors, I also know jobs are reactivated, which brings a chain reaction in terms of application for household loans.

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Currently, banks have divided the loan portfolio between those who pay and the modified credits, for which they will try to close the gap, increasing the charge, will be conservatives al grant credits, they will not actively seek to grant credits and will be increasingly strict to those who are granted the moratorium.

On the other hand, it looks credit demand affected by market expectations as for the fact that many sectors of the economy they were paralyzed for months and the uncertainty about what the economic recovery will be like.

However, the interannual behavior of new loans is 53.7% below the disbursements of the previous year.

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The slight improvement does not compare with the figures as of the same date of the previous year, in fact the economy as a whole foresees a decrease of 9% in this 2020, according to government figures, but a recovery of 4% is estimated for 2021, which represents an incentive for the players in the Panamanian market; However, it must be clear that there is much ground to recover in the coming months and, possibly, by 2022 the economy could return to pre-pandemic levels.

Master’s student at the Interamerican University of Panama.

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