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August 17, 2022

Credit growth accelerates further to 10.7% despite liftoff in May

Credit growth accelerated to 10.7 percent in May from 10.1 percent in April despite the start of the interest rate liftoff by the Bangko Sentral ng Pilipinas (BSP) to curb mounting inflationary pressures.

Data showed the outstanding loans of big banks reached P9.97 trillion in May from P9.01 trillion in the same month last year as some companies decided to borrow ahead of the impending rate hikes.

“With the ongoing normalization of its monetary policy settings, the BSP will continue to ensure that the expansion in credit and liquidity proceeds in line with the outlook for inflation and economic growth while remaining consistent with the BSP’s price and financial stability objectives,” the BSP said.

After slumping for eight straight months during the height of the COVID-19 pandemic, bank lending has been increasing since August last year as the economy finally absorbed the 200 basis points cuts in interest rates and lowering of reserve requirement ratio as part of the BSP’s COVID-19 pandemic response measures.

As the economy continues to rebound strongly and amid rising inflationary pressures, the central bank started its tightening cycle after it delivered back-to-back 25 basis points rate hikes in May and June to anchor inflation expectations.

The benchmark rate is now pegged at 2.50 percent from an all-time low of two percent and is seen rising further as the central bank now expects inflation to breach its two to four percent target at five percent instead of 4.6 percent for this year and 4.2 percent instead of 3.9 percent for next year.

Data released by the BSP showed lending to the real estate sector went up by 16.4 percent jump to P2.08 trillion in end May and accounted for 20.8 percent of the total disbursements.

Loan disbursements to the manufacturing sector picked up further at 16 percent to P1.14 trillion for a share of 11.5 percent, while lending to the wholesale and retail trade as well as repair of motor vehicles and motorcycles grew by 6.2 percent to P1.13 trillion for a share of 11.4 percent.

Likewise, lending by big banks to the electricity, gas, steam, and air-conditioning supply sector inched up by 3.1 percent to P1.06 trillion for a 10.6 percent share.

As the economy further reopens, the rise in consumer loans accelerated to 8.5 percent, reaching P890.59 billion in end May and accounting for 8.9 percent of the total disbursements.

The central bank said that consumer loans recorded a faster growth of 6.7 percent to P879.4 billion for a share of 8.9 percent of the total loans. Credit card loans booked a strong 17.7 percent growth to P464.78 billion.

Motor vehicle loans slipped by 1.9 percent to P238.79 billion.

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