Credit growth accelerates in January

MANILA, Philippines — Credit growth accelerated for the sixth straight month, growing at a faster rate of 8.5 percent in January from the revised 4.8 percent in December due to higher demand, as the economy further reopens from strict COVID lockdowns, according to the Bangko Sentral ng Pilipinas (BSP).

The latest growth figure was the fastest acceleration in bank lending since the 9.6 percent recorded in June 2020.

Based on preliminary data from the BSP, loans disbursed by universal and commercial banks reached P9.44 trillion in January, P755.63 billion higher than the P8.69 trillion recorded in the same month last year.

“Bank lending improved further as easing COVID-19 restrictions and the continuous vaccine rollout supported market sentiment and demand,” the BSP said.

Loans released by big banks started to pick up in August last year after slumping for eight straight months between December 2020 and July 2021, as banks remained risk-averse while demand from borrowers remained tepid due to uncertainties brought about by the pandemic.

The economy finally absorbed the 200-basis-point cuts in interest rates and the lowering of reserve requirement ratio delivered by the BSP as part of the regulator’s pandemic response measures.

The Cabinet-level Development Budget Coordination Committee (DBCC) expects a faster gross domestic product (GDP) growth of seven to nine percent this year after the country emerged from the pandemic induced-recession with an expansion of 5.6 percent last year.

Data showed outstanding loans for production activities grew at a faster rate of 9.6 percent to P8.58 trillion and accounted for 88.4 percent of the total lending in January.

The real estate sector posted a strong double-digit increase of 16.8 percent to P2.05 trillion and accounted for 21.2 percent of the total disbursements, while lending to the wholesale and retail trade, as well as repair of motor vehicles and motorcycles grew at a faster rate of 4.6 percent to P1.12 trillion for a share of 11.4 percent.

Likewise, lending to the manufacturing sector grew by 11.5 percent to P1.08 trillion, while loans disbursed to the electricity, gas, steam and air-conditioning supply sector rose by 0.9 percent to P1.05 trillion.

The BSP also reported that household lending finally eked out a 0.1 percent growth to P858.56 billion, credit card loans increased by 6.8 percent to P431.61 billion, while auto loans continued to decline by 5.4 percent to P340.05 billion.

Michael Ricafort, chief economists at Rizal Commercial Banking Corp., said that borrowers are rushing financial activities to lock in low interest rates with the anticipated tightening by the US Federal Reserve.

Ricafort said bank lending may continue to pick up in the coming months as the country further eases granular lockdowns, resulting in the further reopening of the economy and leading to more economic activities and higher demand for loans.

The BSP said it would continue to prioritize policy support for the economy in order to sustain the recovery in credit activity amid the continued uncertainty in the growth outlook.

“Nevertheless, stronger signs of recovery in overall economic activity will allow the BSP to carefully plan for the eventual normalization of its pandemic-related interventions when conditions warrant, in line with its price and financial stability mandates,” it said.

Meanwhile, the BSP also reported a 9.8 percent increase in domestic liquidity or money supply to P15.3 trillion in January, reflecting the continued pick-up in bank lending.