Lending activities in the Philippines are seen to get a lift from the continued decline in domestic interest rates, and support the sustained resilience of the Philippine economy.
Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort told the Philippine News Agency on Friday that the series of rate cuts made by the Bangko Sentral ng Pilipinas (BSP) – amounting to 100 basis points so far this year – is expected to encourage more businesses to take out bank loans, which will help boost domestic expansion.
Preliminary data released by the BSP on Wednesday night showed that bank lending, excluding placements in the BSP’s reverse repurchase (RRP) facility, grew by 10.5 percent on an annual basis in September, slower than the 11.2 percent in the previous month.
This is the slowest in 14 months, or since July 2024, Ricafort said, attributing it partly to the impact of weather-related disturbances that reduced business transactions and other economic activities, as well as a decline in infrastructure-related spending.
Business-focused loans during the period rose 9.1 percent, slower than the 9.9 percent last August, and consumer loans by 23.5 percent, a slowdown from the previous month’s 23.9 percent.
Despite the slight deceleration in bank lending growth, Ricafort said, “large bank loans growth still considered among the fastest/best in more than 2.5 years or since December 2022.”
He said the steady growth of bank lending is “still a good sign for the economy as a bright spot/growth driver,” partly boosted by demographics, with the average age of the country’s 114 million population set at 25 years old.
This factor, he said, “makes consumer loans a growing pie in the local banking industry, as the country’s consumer loans-to-GDP (gross domestic product) ratio at more than 11 percent is still relatively lower compared to other more developed ASEAN countries.”
Ricafort also said the reduction in banks’ reserve requirement ratio (RRR) in September 2024 alone, by 250 basis points for universal and commercial banks, was estimated to have infused about PHP400 billion into the domestic financial system.
“The RRR cuts could have increased banks’ loanable funds with reduced intermediation costs and borrowing costs, thereby would help increase the demand for loans/credit that, in turn, would boost economic/GDP growth and investment valuations, as part of monetary easing measures, for as long as inflation remains well anchored and within the central bank’s target,” he added.
LANDBANK PHOTO