The Bangko Sentral ng Pilipinas (BSP) reported that bank lending in the Philippines has grown by double digits, year-on-year, in January this year. The expansion, however, was at a slower pace compared to the previous month.
In a media advisory, the Philippine central bank said that outstanding loans of universal and commercial banks (U/KBs), net of reverse repurchase (RRP) placements with the BSP, grew by 10.4 per cent, year-on-year, in January this year from 13.7 per cent (revised) in December 2022.
Preliminary data shows that outstanding universal and commercial bank loans, net of RRPs, were broadly unchanged based on a month-on-month seasonally-adjusted basis. Meanwhile, outstanding loans to residents, net of RRPs, went up by 10.2 per cent in January following a 13.5-per cent (revised) increase in the previous month.
Outstanding loans for production activities also grew by 9.2 per cent in January this year from 12.4 per cent (revised) in December, mainly due to lending activities of the following major sectors:
- electricity, gas, steam and airconditioning supply (12.7 per cent);
- wholesale and retail trade, repair of motor vehicles and motorcycles (10.4 per cent);
- manufacturing (10.3 per cent); information and communication (21.4 per cent); and
- real estate activities (3.5 per cent).
Likewise, consumer loans to residents grew by 20.3 per cent in January from 25.1 per cent (revised) in the previous month, driven by the faster year-on-year growth in credit card loans and salary-based general-purpose consumption loan.
Outstanding loans (including loans by UKB’s FCDU) to non-residents also expanded by 16.8 per cent in January from a 19.9 per cent (revised) increase in the previous month.
Brisk credit growth and adequate liquidity will continue to sustain the momentum of economic growth.
Credit growth to soften in the coming months
While bank lending in the Philippines may have continued to expand by the end of 2022, extending until the first month of this year, a financial analyst said he expects credit growth to soften in the coming months.
Nicholas Antonio Mapa, a senior economist at ING Bank in Manila, said that credit growth could eventually face some hurdles in 2023.
This, he said, may be expected once interest rate hikes start seeping into the domestic economy.
“In the coming months, we can expect bank lending, especially lending to productive sectors, to slow down as rate hikes bite. Bank lending will also slow down as consumer credit loans begin to feel the impact of the BSP’s decision to increase the rate cap on credit cards to 3%,” he said in a press statement.
For its part, the BSP said it will continue to perform its mandate of ensuring that price and financial stability in the country, as well as liquidity and bank lending conditions, remain stable.