Credit growth eases in October amid slump in manufacturing

MANILA, Philippines — Credit growth fell below double-digit level, easing to 9.3 percent in October from 10.5 percent in September amid the slower rise in loan disbursements to the production sector, according to the Bangko Sentral ng Pilipinas (BSP).

According to BSP Governor Benjamin Diokno, loans disbursed by big banks reached P8.79 trillion as of end-October from P8.05 trillion as of end-October last year.

“Notwithstanding the expansion in credit across sectors, growth in outstanding loans of universal and commercial banks, net of reverse repurchase placements with the BSP, was slower at 9.3 percent in October, from 10.5 percent in the previous month,” Diokno said.

Data released by the central bank showed loans extended by big banks for production activities grew slower at 7.5 percent to P7.67 trillion in October from P7.14 trillion compared to the nine percent increase in September.

The BSP chief said the growth in lending to the real estate sector recovered to 18.4 percent to P1.6 trillion as of end-October and accounted for 18.2 percent of the total loan disbursements by big banks.

On the other hand, the increase in disbursements to the wholesale and retail trade as well as repair of motor vehicles and motorcycles declined to three percent to P1.14 trillion for a share of 13 percent.

Likewise, loan releases to the manufacturing sector contracted further by 1.6 percent to P1.04 trillion as of end-October, while the increase in lending to the electricity, gas, steam and airconditioning supply further eased to 5.2 percent with P967.71 billion.

Diokno said loans for household consumption grew faster at 26.7 percent to P805.93 billion in end October this year from P635.99 billion in end October last year.

The BSP chief attributed the strong growth to the faster increase in motor vehicle, credit card and salary-based general purpose consumption loans.

Data showed credit card loans surged by 27.2 percent to P343.01 billion from P269.7 billion, while auto loans zoomed by 30.5 percent to P371.61 billion from P284.68 billion.

The BSP has so far slashed interest rates by 75 basis points due to easing inflation as well as slower than expected gross domestic product (GDP) growth in the first half of the year.

The easing partly reversed a tightening cycle that saw interest rates rise by 175 basis points last year as inflation accelerated to 5.2 percent from 2.9 percent in 2017 and exceeded the BSP’s two percent to four percent inflation target due to elevated oil and food prices as well as weak peso.