Credit growth eases to 9.9% in March, slowest in 8 years

MANILA, Philippines — Credit growth slowed for the fifth straight month in March, hitting  single-digit level for the first time in more than eight years due to the decline in household loans after a series of rate hikes by the Bangko Sentral ng Pilipinas (BSP) last year to control inflation.

Latest data from the BSP showed bank lending expansion eased to 9.9 percent in March from 13.7 percent in February. Credit growth has been slowing down since recording an 18.1 percent increase in October last year.

The last time the Philippines booked a single-digit increase in bank lending was in December 2010 with 8.9 percent.

BSP Governor Benjamin Diokno said banks disbursed P8.06 trillion worth of loans as of end-March this year, P729 billion higher than the P7.33 trillion released a year earlier.

Diokno said loans for household consumption contracted by 5.8 percent in March versus a 14.9 percent increase in February.

He said household loans amounted to P557.41 billion in end-March from P591.86 billion a year ago “amid the deceleration in credit card loans and contraction in motor vehicle loans, salary-based general purpose consumption loans and other types of household loans.”

Data showed the increase in credit card loans slowed down to 12.5 percent to P269.67 billion.

Auto loans fell 20.2 percent to P216.89 billion, while salary-based loans declined by 8.5 percent to P63.17 billion. Other types of loans also plunged by 33 percent to P7.68 billion.

Likewise, Diokno said loans released for production activities booked a slower increase of 11.4 percent to P7.21 trillion from P6.48 trillion and accounted for 89.5 percent of the total loans disbursements in end-March.

Diokno said growth in production loans was fuelled by construction with 41.7 percent, financial and insurance activities with 32.7 percent, as well as wholesale and retail trade, repair  of motor vehicles and motorcycles with 11.6 percent.

The growth in lending to the real estate sector eased to 8.2 percent to P1.38 trillion for a 17.1 percent share.

The increase in disbursements to the wholesale and retail trade as well as repair of motor vehicles and motorcycles also eased to 11.6 percent to P1.1 trillion for a 13.7 percent share.

Likewise, the growth of disbursements to manufacturing companies declined to 10.6 percent to P1.06 trillion, accounting for 13.2 percent of total loans, while the amount disbursed to the electricity, gas, steam and airconditioning supply was steady at 9.4 percent to P922.49 billion for an 11.4 percent share.

Robert Dan Roces, assistant vice president and chief economist at Security Bank Corp., said bank lending would continue to soften this year amid slower economic expansion and the tightening episode of the BSP last year.

“Loan growth will likely continue easing for the year as higher interest rates persist and temper economic activity,” he said.

The BSP’s Monetary Board lifted rates by 175 basis points in five straight rate-setting meetings between May and November last year to prevent inflation from spiralling out of control.

Inflation accelerated to 5.2 percent last year from 2.9 percent in 2017, exceeding the central bank’s two to four percent target, due to elevated oil and food prices as well as a weak peso.

Easing inflation, however, has allowed the BSP to take a breather from its tightening cycle as it kept interest rates unchanged since December.