Bank lending in the Philippines grew at its fastest pace in nine months in February, according to the latest data from the Bangko Sentral ng Pilipinas (BSP). Excluding their lending to each other, outstanding loans of universal and commercial banks increased by 8.6 percent year-on-year to reach P11.61 trillion.
This marked the fastest loan growth recorded since May 2023 and surpassed the 7.8 percent uptick in bank credit seen in January. Despite this growth, bank lending only rose by 0.7 percent on a month-on-month basis.
Chief economist at Rizal Commercial Banking Corp., Michael Ricafort, noted that there was still some weakness in loan demand as the economy continued to adjust to previous anti-inflation rate hikes by the BSP. Ricafort mentioned that the high-interest rate environment made borrowings more expensive, impacting credit expansion.
The Monetary Board of the BSP recently decided to keep the key rate at 6.5 percent, the highest in almost 17 years, in response to inflation inching closer to the upper end of the central bank’s target range. The BSP had implemented several rate hikes over the past months to combat inflation.
Despite the tight financial conditions, consumer loans saw a significant 25.2 percent growth in February. This expansion was primarily driven by increased credit card loans (30.1 percent) and motor vehicle loans (19.1 percent). Loans to businesses also grew by 6.8 percent, with higher lending to firms involved in real estate activities and energy supply.
BSP Governor Eli Remolona Jr. hinted at a possible rate cut later in 2024 if inflation shows a more convincing downtrend. Ricafort also shared the sentiment, stating that easing trends in inflation would eventually justify local policy rate cuts later in the year.
