Lending rates dropped in the first seven months of the year, as liquidity in the banking system continued to grow.
Monetary officials said that with significant amount of money at their disposal, banks had more reasons to lend to both individual borrowers and enterprises, and to make loans more attractive through reduced interest rates.
Data from the Bangko Sentral ng Pilipinas showed that the average bank lending rate stood at 6.76 percent on all maturities in January to July, falling by 1.04 percentage points from 7.8 percent in the same period last year. This was despite moves of the BSP in the first semester to raise its key policy rates, which serve as a guide for commercial rates setting.
Industry players said the banks’ appetite for lending was more significant this year. The low interest rate environment encouraged the public to borrow more from banks.
The BSP earlier reported that lending by universal and commercial banks (UKBs) grew by about 22 percent in the first three quarters of the year, accelerating from about 10 percent last year, as the growing supply of available money helped banks meet rising demand for loans.
The total loan portfolio of UKBs amounted to P2.65 trillion as of end-September this year, up from P2.17 trillion a year ago.
Monetary officials said the low interest rate environment was supportive of economic growth as it prompted individuals and enterprises to borrow more and use the money for consumption and investments.
Despite the faster growth in bank lending, however, the economy still suffered from slower growth so far this year.
Economists blamed this partly on the anemic global demand for goods and services, which resulted in lower export receipts for the Philippines.
They said the economic slowdown could also be attributed to underspending by the government.
The economy, measured in terms of gross domestic product, grew by a mere 3.6 percent in the first three quarters of the year.
The government said that with the performance in the first nine months, the full-year growth target of between 4.5 and 5.5 percent, which is much slower than last year’s growth, might no longer be achieved.
GDP growth stood at 7.6 percent last year, the fastest in more than 30 years.
BSP Governor Amando Tetangco Jr. last week said the pace of public spending must increase to complement the rise in private sector spending, which was aided by bank lending.