Bank lending still up by a double-digit pace

Banks started the year on a high note as the loans they extended continued to rise by a double-digit pace in January.

The Bangko Sentral ng Pilipinas on Friday reported that outstanding loans from universal and commercial banks in the country reached P3.18 trillion as of the end of January—up by 15.4 percent from the P2.76 trillion posted in the same period last year.

According to the BSP, the robust pace of credit growth during the month supported expectations that bank lending will continue to help fuel expansion of the economy this year. Industry projections point to a 10-15 percent growth in lending this year.

“Sustained credit growth is expected to support the momentum of the economy,” the central bank said.

The BSP said the increase in outstanding bank loans would boost consumption and investment activities in the country. Outstanding loans to businesses accounted for nearly P2.9 trillion of the total—up by 15.6 percent from last year’s P2.5 trillion.

Those that benefited the most from the increase in lending were companies engaged in real estate, transportation and communication, wholesale and retail trade, and manufacturing.

Outstanding loans to individuals accounted for P257.44 billion of the total—up by 12.5 percent from P228.78 billion a year ago.

Credit card transactions, as well as automobile, housing, and personal loans accounted for the bulk of individual borrowings.

In a separate statement, the BSP said the overall liquidity in the economy likewise registered a double-digit rise in January, aided partly by the growth in bank lending.

Domestic liquidity, measured in terms of M3, grew by 10.8 percent year-on-year to P4.97 trillion.

M3 is a broad measure of liquidity, covering currencies in circulation, savings deposits, time deposits, demand deposits, and money market instruments.

The strong pace of credit growth seen over the past few years has stoked concerns that the Philippine economy may overheat. Some analysts believe that substantial growth in credit tends to accelerate demand for goods and services, thereby pushing inflation to worrisome levels. But the BSP stressed that banks could still lend more without causing the economy to overheat.

Also, the BSP expects inflation to remain benign over the medium term. Based on its latest projections, inflation would likely settle below 4 percent this year and the next. Michelle V. Remo