MANILA, Philippines — Bank lending continued its nascent climb in October, sparking hopes that consumer spending, a major growth driver in the Philippines, is on the mend amid the coronavirus onslaught.
Excluding interbank lending, outstanding loans of big banks grew 3.5% year-on-year in October to P9.27 trillion, the Bangko Sentral ng Pilipinas reported Monday. That expansion was faster than 2.7% growth chalked up in September and marked the third straight month of loan growth.
On a month-on-month basis, credit grew a bigger 29.6% in October, a performance that also meant more money circulated in the domestic economy during the month. A separate BSP report showed M3, a measure of money supply, jumped 8.2% year-on-year in October to P14.6 trillion, albeit slower compared to the revised 8.2% growth in September.
The figures reinforced observations that the BSP’s support to the economy that involved slashing interest rates to a historic-low 2% last year is now starting to be felt. The rate cuts are meant to encourage consumers and businesses to borrow money from banks in a bid to stimulate spending in the consumption-starved Philippines, which suffered from one of the worst coronavirus outbreaks in Asia.
Broken down, bank loans for production activities went up 4.9% year-on-year in October, higher than 4.4% clip in the preceding month. Much of the boost came from credit extended to businesses engaged in real estate, information and communication, financial and insurance, and manufacturing.
Consumer loans, meanwhile, continued their contraction in October amid still elevated unemployment rate, although the magnitude of collapse was softer at 7.2% on-year compared to 7.8% slump in September. The BSP said there was a “slight” year-on-year increase in credit card loans last month and a “slower contraction” in salary loans.
While another month of loan growth was a welcome development, Michael Ricafort, chief economist at Rizal commercial Banking Corp., believed the pace of expansion was rather “slow” as some corporate borrowers might be ditching banks for other fundraising channels like the bond and equity markets.
“The relatively slower growth in bank loans in recent months could also be partly attributed to less reliance on bank loans by some of the country's biggest conglomerates, in view of their increased fund-raising activities in the capital markets, especially through the bond and stock markets,” Ricafort said in an e-mailed commentary.