Credit growth in line with GDP expansion, says Bangko Sentral

MANILA, Philippines - The Bangko Sentral ng Pilipinas said it is not worried about credit growth in the country as this is seen in line with the pace of economic expansion.

“The rate of growth of domestic credit is running at around 13 to 14 percent, we believe that it is consistent with the economic growth and inflation target of the BSP,” central bank governor Amando M. Tetangco Jr. said.

“While we have been able to provide to the economy in terms of funding as shown by the behavior of domestic credit, this has not resulted in acceleration of inflation,” he pointed out.

Latest available data from the BSP showed lending universal and commercial banks, net of bank placements in the central bank, went up 14.2 percent to P3.405 trillion in August from the same month last year.

The loans were mostly extended for production activities, primarily to the real estate, manufacturing, and wholesale and retail trade sectors.

As a result, this helped spur the economy’s expansion of 7.7 percent in the first half, a rate already higher than the government’s target of six to seven percent.

Tetangco stressed “we have reached this desirable convergence of both strong economic growth and low interest rate.”

“Moving forward, we will continue to address and assess whether the growth of credit is appropriate for the needs of the economy,” he added.

The Philippine economy expanded at a faster-than-expected 7.6 percent in the first half, already breaching the government’s target of six to seven percent.

The central bank earlier said the sustained growth in bank lending is supporting the economy as bulk of the borrowings continue to be extended for production.

Loans extended for production made up four-fifths of the total credit portfolio in August, while the remaining balance went to consumer loans such as credit card and auto loans.

Tetangco said “At this point in time, we think that credit of 13 to 14 percent is reasonable, as the credit to GDP (gross domestic product) for the Philippines is 51 percent, one of the lowest in the ASEAN-5.”

The Association of Southeast Asian Nations-5 refers to Indonesia, Malaysia, Philippines, Singapore and Thailand.

“We will make sure that the growth in credit as well as in other monetary aggregates will be consistent with the objective of strong growth and low inflation,” Tetangco added.