Bank lending expanded by 19.3% in 2011—BSP

MANILA, Philippines—Bank lending expanded by 19.3 percent by the end of 2011, a pace of growth that the central bank said should help speed up growth of the Philippine economy in 2012.

The Bangko Sentral ng Pilipinas reported on Wednesday that outstanding loans of universal and commercial banks in the country amounted to P2.79 trillion by the end of 2011, up by 19.3 percent from that registered the year before.

The rise in bank lending aided the 6.3-percent growth of overall liquidity within the domestic economy, the BSP also said. It reported that “M3” – a broad measure of liquidity that includes currencies in circulation, savings and other types of deposits, money-market funds, etc. – amounted to P4.7 trillion by the end of 2011, up 6.3 percent year on year.

The credit growth of 19.3 percent  is considered robust by central bank officials, as bank lending was growing by only around 10 percent in the previous two years.

“In the midst of weaker global economic prospects, robust credit growth should provide adequate support to domestic production, investments, and spending,” the BSP said in the report.

The central bank said lending would be vital in achieving faster growth for the economy as it could support both consumer spending and job-generating investments by enterprises.

In 2011, the Philippine economy grew by 3.6 percent year on year. This was positive news if compared with the anemic growth rates of less than 2 percent for many advanced economies in the West, but a disappointment if compared with the 2010 growth rate of 7.6 percent, the fastest for the Philippines in over three decades.

The economic slowdown last year was partly blamed on the decline in exports, which in turn was attributed to the crises in the eurozone and United States – two key export markets.

The BSP said that to counter the ill-effects of anemic global demand for Philippine-made goods (and goods from other exporting countries), domestic demand for goods and services must be strengthened. It said robust growth in bank lending would help do exactly that.

The government aims for the economy to grow faster this year, or by 5 to 6 percent.

The BSP said businesses have been urged to take advantage of the currently high liquidity of banks and relatively low interest rates in the country by tapping loans from banks to support their investment plans.

It also said banks have been encouraged to lend more in 2012, even if credit growth was already robust last year, as their resources for lending remained highly significant.

Banks have over P1 trillion parked in the BSP, particularly in their special deposit accounts where they earn interest. Banks are urged to use more of their fund for lending and less for placement in the BSP deposit facility.