Bank lending grows at slower pace in October

MANILA, Philippines — Credit growth eased in October after rising for four straight months, prompting debt watchers and economists to flag possible overheating of the Philippine economy.

Data released by the Bangko Sentral ng Pilipinas (BSP) yesterday showed bank lending rose 19.9 percent in October, slower than the 21.1 percent growth recorded in September.

Credit growth has been picking up pace, rising 18.7 percent in May, 19 percent in June, 19.7 percent in July, 20.4 percent in August, and 21.1 percent in September.

“Going forward, the BSP will continue to ensure that the expansion in domestic credit and liquidity conditions proceeds in line with overall economic growth while remaining consistent with the BSP’s price and financial stability objectives,” BSP Governor Nestor Espenilla Jr. said in a statement.

Loans for production activities extended by banks increased 18.7 percent to P6.01 trillion in end October. This was slower than the 20.7 percent growth recorded last September but still comprised 88.3 percent of the loans disbursed by the banking sector.

Credit disbursed to the real estate sector went up 16 percent to P1.17 trillion for a 17.2 percent share of the total loan portfolio while lending to the wholesale and retail trade as well as repair of motor vehicles and motorcycles grew faster at 19.9 percent to P924.56 billion for a 13.6 percent share.

BSP data showed lending in the manufacturing sector rose 9.4 percent to P873.64 billion for a 12.8 percent share while credit extended to electricity, gas, steam and airconditioning supply jumped 25 percent to P821.87 billion for a 12.1 percent share.

Loans for household consumption grew 23.4 percent to P554.78 billion.

Motor vehicle loans zoomed 32.6 percent to P249.22 billion as consumers purchased ahead of the impending imposition of higher excise tax under the comprehensive tax reform program.

Credit card loans went up 19.1 percent to P221.64 billion while salary-based general consumption loans rose 11.6 percent to P69.77 billion.

Debt watchers Fitch Ratings and Moody’s Investors Service, and multilateral lender International Monetary Fund have flagged overheating risks.

The country’s GDP growth climbed to 6.9 percent in the third quarter from the revised 6.7 percent in the second quarter, bringing to 6.7 percent the average expansion in the first nine months of the year. The country has booked a positive GDP growth for 75 straight quarters since the Asian financial crisis.

Inflation, on the other hand, averaged 3.2 percent from January to November staying within the BSP’s two to four percent target.

Espenilla earlier said the Philippine economy continued to grow within potential while the non-performing loan ratio of Philippine banks stood at a mere 1.4 percent.

He added the country’s credit-to-GDP ratio of 63.6 percent as of the second quarter was still one of the lowest by far in Asia, indicating relatively low overall leverage.

The BSP also reported that domestic liquidity or money supply grew at a faster rate of 14.8 percent to P10.3 trillion as of the end of October but this remained consistent with the central bank’s prevailing outlook for inflation and economic activity.